Q2 FY26 Cement Sector Earnings Preview: Weak Prices and Monsoon Slump to Hit Margins; PL Backs Ultratech, Ambuja

Mumbai | October 8

The cement sector is heading for a soft Q2FY26 as weak prices, seasonal monsoon slowdown, and subdued demand limit earnings momentum. According to Prabhudas Lilladher’s Cement Sector Q2FY26 Earnings Preview, the industry’s revenue, EBITDA, and PAT are expected to decline 15%, 26%, and 36% quarter-on-quarter (QoQ) respectively, though rise 13%, 55%, and 95% year-on-year (YoY).

Cement prices fell across most regions in August, particularly in the South and East, before stabilising in September following GST rationalisation. Rural construction demand stayed muted, and infrastructure execution slowed due to rain-related disruptions.

“Execution of GST rationalisation is largely complete, leaving limited room for price hikes until demand improves post-festive season,” PL Research highlighted in its report.

Buzzing: WeWork India IPO Allotment Status: Check Date, GMP & Listing Updates

Margins Under Pressure; Realisations Fall Across Regions

EBITDA per tonne is expected to fall by ₹150–₹240 sequentially, with southern players facing the sharpest corrections. PL estimates average EBITDA/tonne at ₹920, down 16% QoQ but 44% higher YoY. Rising pet coke prices at around USD 120/t have added to production costs, though freight and fuel costs remained steady.

PL expects cement demand to grow by about 9% YoY, supported by new acquisitions and capacity additions. However, volume growth in existing operations remains subdued due to the prolonged monsoon and delayed infrastructure project execution.

Cement Sector Q2FY26 Snapshot

Source: Prabhudas Lilladher Research, Q2FY26 Preview

PL’s Top Picks: Ultratech and Ambuja Cement

PL maintains a constructive stance on large-cap leaders Ultratech Cement and Ambuja Cement for their cost efficiency and operational strength. “Ultratech’s capacity scale and discipline in cost control should cushion price volatility. Ambuja’s integration benefits and lean balance sheet make it well-positioned for the post-festive rebound,” the brokerage stated.

Shree Cement has also been upgraded to Accumulate from Hold, driven by stable pricing, valuation comfort, and consistent performance in its key markets.

Valuation View and Sector Outlook

At the upper end of estimates, Ultratech trades at 14.1x FY26E EV/EBITDA, while Ambuja trades at 6.2x, offering attractive entry points for long-term investors. Margins are expected to recover gradually in H2FY26 on the back of improving utilisation, festive demand, and easing input costs.

While near-term headwinds persist, PL remains positive on the sector’s long-term fundamentals, supported by infrastructure expansion, urban housing demand, and a renewed government focus on affordable housing projects.

PL Ratings and Target Prices

• Ultratech Cement – Accumulate | Target ₹13,599
• Ambuja Cement – Buy | Target ₹701
• ACC Ltd – Buy | Target ₹2,311
• Dalmia Bharat – Accumulate | Target ₹2,372
• Shree Cement – Accumulate | Target ₹32,410
• Nuvoco Vistas – Accumulate | Target ₹464

Bottomline

Despite near-term margin pressures, the long-term outlook for India’s cement industry remains favourable. Strong balance sheets, capacity expansion, and cost leadership position key players like Ultratech and Dalmia Bharat as structural beneficiaries of India’s infrastructure and housing boom.

Also Read: Gold Rally Lifts Titan, Muthoot Finance and P N Gadgil as MCX Prices Hit Record Highs