Cement Sector Performance and Outlook

Cement sector volume grew 8% and revenue by 9% in Q4FY26, while EBITDA grew 4% and PAT by 24%.

Reader Takeaway: Healthy volume growth is a positive, but rising input costs are a key concern.

What just happened

In the fourth quarter of fiscal year 2026 (Q4FY26), the cement sector experienced a volume growth of 8% and a revenue increase of 9%. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) saw a growth of 4%, while Profit After Tax (PAT) surged by 24%. Per tonne metrics show EBITDA at Rs 1,082, blended realization at Rs 5,478, and costs at Rs 4,396, with power and fuel costs at Rs 1,063.

Why this matters

Despite strong volume and revenue growth, the sector faces significant challenges from rising input costs. Elevated prices for pet coke and fuel are expected to increase costs per tonne in the upcoming quarters. While companies have attempted to pass these costs on through price hikes, the sustainability of these increases is uncertain due to competitive intensity and varying regional demand.

The backstory

Axis Securities projects industry volume growth to remain between 6-8% for FY27, supported by continued government infrastructure spending and stable housing demand. This forecast is underpinned by factors like market leadership and capacity expansions by major players such as UltraTech Cement, Dalmia Bharat, and JK Cements.

What changes now

Companies will need to closely monitor and manage input costs, particularly pet coke and fuel, which are expected to remain high in Q1 and Q2 of FY27. The ability to sustain price increases will be crucial for maintaining profitability amidst new capacity additions that could intensify competition.

Risks to watch

Key risks include input cost inflation, with an estimated impact of Rs 350-400 per tonne over the first two quarters of FY27 due to diesel, packaging, and pet coke. Competitive intensity from new capacities might cap realisations. Additionally, regional demand is mixed, with softness in North and East regions compared to strength in South, Central, and West.

Peer comparison

Brokerage firm Axis Securities has identified top conviction ideas: UltraTech Cement (BUY, TP Rs 14,000*) for its market leadership and planned expansions, Dalmia Bharat (BUY, TP Rs 2,430*) for strong volume growth visibility and upcoming capacity expansion, and JK Cements (BUY, TP Rs 6,005*) for its ongoing expansion and focus on margin growth.

Context metrics (time-bound)

Industry volume growth for FY27 is projected at 6-8%. Pet Coke prices are expected to be between $150-160/tonne in Q1 and Q2 of FY27.

What to track next

Investors should track input cost trends, especially for pet coke and fuel, and the success of cement companies in implementing and sustaining price hikes to protect their margins in the upcoming quarters. The performance in the North and East regions will also be a key indicator.