Cement Sector Eyes Robust Q3 Growth Amidst Price Weakness

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AuthorKavya Nair|Published at:
Cement Sector Eyes Robust Q3 Growth Amidst Price Weakness
Overview

Cement firms anticipate strong volume and revenue expansion in Q3FY26, driven by resilient demand from housing and infrastructure projects, and benefiting from a GST rate cut. However, analysts note persistent weak pricing power due to increased competition and capacity additions.

Cement Sector Poised for Volume Surge in Q3FY26

Cement companies are set to report substantial volume and topline growth in the third quarter of the financial year 2026. This expansion is fueled by sustained demand, particularly from housing and government infrastructure projects, alongside higher realisations, according to an earnings preview by Axis Securities.

Leading firms including Ambuja Cements, JK Cement, Dalmia Bharat, Birla Corporation, JK Lakshmi Cement, UltraTech Cement, Star Cement, and Shree Cement are expected to showcase increased revenues and sales volumes. These positive trends underscore the sector's resilience even as pricing power remains constrained.

Margin Pressures and Profitability Outlook

Despite the volume surge, certain companies may face margin challenges. JK Lakshmi Cement, for instance, is projected to see a decline in its gross margin, estimated at 34.6 per cent for Q3FY26 compared to 35.5 per cent in the prior quarter. Ambuja Cements and UltraTech Cement might experience contractions in their realisations by 5 per cent and 3 per cent, respectively.

Star Cement is anticipated to lead in net profit growth for the quarter, bolstered by better Ebitda and realisations. HeidelbergCement India and Birla Corporation are also expected to follow with strong profit performance, positioning them favorably within the sector.

Demand Drivers and GST Impact

Axis Securities forecasts an 11 per cent year-on-year growth in cement demand throughout the financial year, driven by robust housing and infrastructure spending. Rural demand is projected to outpace urban demand, supported by above-average monsoons and wage growth.

The recent reduction in the Goods and Services Tax (GST) rate to 18 per cent is viewed as a significant long-term growth catalyst. This tax relief is estimated to decrease the tax burden by ₹30-₹35 per bag based on second-quarter prices. Combined with the government's 'housing for all' initiative, this supports demand prospects in Tier II and Tier III cities for the latter half of fiscal year 2026.

Competitive Pricing Landscape

Sequentially, cement prices saw a 1-2 per cent decline in Q3FY26. This was attributed to heightened competition and the effects of GST rate rationalisation, resulting in a generally weak pricing scenario for the quarter. The industry managed a modest 1 per cent year-on-year growth in realisations.

"Pricing power remained limited due to intensifying competition, aggressive capacity addition, and a strategic shift towards volume growth over realisation," Axis Securities noted. As the industry enters its busiest construction season in Q4FY26, manufacturers are planning price hikes of ₹10-₹20 per bag to protect profit margins.

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