Whalesbook
Cement Prices Face Headwinds, Recovery Expected from April 2026
JM Financial's recent analysis, based on channel checks, indicates that pan-India cement prices saw a marginal decline of approximately ₹2 per bag, settling at ₹334 in December 2025. This represents a sequential correction of 2-2.5 percent quarter-on-quarter. The downturn was largely influenced by the non-trade segment, with sharper price drops of 3-4 percent observed in the Eastern and Southern regions of India.
Industry Demand Shows Mixed Signals
Despite the price pressure, industry demand demonstrated resilience, likely growing in the low double digits year-on-year in December 2025. This growth reflects broad-based improvements across various regions. For the December 2025 quarter (Q3FY26), this translates into high single-digit year-on-year growth, a notable increase from the approximately 4 percent growth seen in the first half of fiscal 2025 (1HFY26). However, the recovery remains uneven. Regions like Delhi NCR are facing demand restrictions due to pollution concerns, while a sustained recovery in Maharashtra is anticipated only after the municipal elections conclude in January 2026. Demand in Southern India is expected to pick up post-Pongal.
Rising Input Costs Squeeze Margins
The cement sector is grappling with increasing input costs. While US CFR petcoke prices saw a slight drop of around $7 per tonne in December 2025, average prices for the third quarter (Q3FY26) increased by about 5 percent quarter-on-quarter to $115 per tonne. This has led to an estimated increase in landed costs, pushing input costs higher by approximately ₹50 per tonne, or ₹3 per bag. This cost pressure is expected to impact profitability more significantly in the latter part of Q4FY26 due to inventory holding periods. Typically, cement companies witness sequential profitability gains in Q3, but JM Financial notes that the recovery this quarter is anticipated to remain below historical averages.
JM Financial's Top Pick: UltraTech Cement
Amidst these sector-wide dynamics, JM Financial has reiterated its strong conviction in UltraTech Cement, naming it their top pick within the sector. The brokerage maintains a 'Buy' call on the stock, setting a target price of ₹14,250 per share. This recommendation underscores the firm's belief in UltraTech Cement's market position and future prospects, despite the prevailing price and cost challenges.
Future Outlook and Price Recovery
Analysts anticipate that while companies have announced price hikes for January 2026, ranging from ₹10-40 per bag across regions, their absorption by the market might be limited. A more meaningful and sustained recovery in cement prices is projected to commence from April 2026. This timing aligns with the typical easing of the annual volume push and a strategic shift by companies to focus more intently on profitability. The trajectory of cement prices in the coming months will be a critical factor for investors to monitor.
Impact
The performance of the cement sector is closely tied to infrastructure development and construction activity. Fluctuations in cement prices and demand directly affect the profitability of cement manufacturers like UltraTech Cement, influencing their stock market performance. Rising input costs can pressure margins, while a successful price recovery can boost earnings. Investors will be watching the sector for signs of sustained demand growth and margin improvement, particularly as the industry transitions towards a more profitable pricing environment post-April 2026. The outlook from JM Financial provides a key data point for investment decisions in this cyclical industry.
Impact rating: 6/10
Difficult Terms Explained
- Petcoke: Petroleum coke, a byproduct of oil refining, often used as fuel in industries like cement manufacturing.
- Q-o-Q: Quarter-on-Quarter. Comparing a financial metric from one quarter to the previous quarter.
- Y-o-Y: Year-on-Year. Comparing a financial metric from one period to the same period in the previous year.
- FY26: Fiscal Year 2025-2026.
- Q3FY26: The third quarter of the Fiscal Year 2025-2026.
- GST: Goods and Services Tax, an indirect tax levied on the supply of goods and services in India.
- MoM: Month-on-Month. Comparing a metric from one month to the previous month.
- NCR: National Capital Region, the metropolitan area surrounding Delhi, India.
- CFR: Cost and Freight. A shipping term where the seller covers the cost of goods, insurance, and freight to the destination port.