Cement sector stocks witnessed a strong rally with shares surging up to 17% on Wednesday's trading session amid heavy volumes. According to Business Standard, Nuvoco Vistas Corporation led the gains, surging 17% to ₹398.50 with average trading volumes jumping nearly 20-fold, with a combined 41.14 million equity shares changing hands on NSE and BSE. Other major gainers included Birla Corporation (up 8%), JK Lakshmi Cement (6%), Dalmia Bharat (4%), and India Cements, UltraTech Cement, Heidelberg Cement India, JK Cement and Shree Cement (3% each). The rally was driven by positive medium- to long-term outlook and strong structural demand expectations.
According to reports from NDTV Profit, 15 cement stocks are in focus ahead of Q1 FY27 results, with Ambuja Cements, ACC, and UltraTech Cement among the 'Buy' recommendations. However, Ramco Cements has been rated 'Reduce' by the brokerage. The recommendations come as the sector prepares to report mixed performance in the June quarter, with analysts maintaining positive long-term outlook despite near-term earnings headwinds.
As reported by Equirus Securities, the quarter is expected to be reasonably healthy from a demand perspective, with volume growth of around 8.2 per cent year-on-year (YoY). According to JM Financial, volume growth is likely to be led by UltraTech Cement, Shree Cement, and JK Cement, each anticipated to register strong double-digit growth of over 10 per cent YoY, thereby outperforming the industry amid capacity additions and market share gains. Dalmia Bharat is expected to post growth of 9 per cent YoY, while Ambuja Cements is likely to witness a 7 per cent YoY decline in volumes due to market share loss and slower-than-expected ramp-up from acquired assets. Looking ahead, analysts expect domestic cement demand to grow at a healthy 6-8% CAGR over FY27-FY29, driven by sustained public infrastructure investments and housing demand.
According to Mirae Asset Sharekhan, cement companies implemented multiple price hikes during the quarter to offset rising costs, although several increases were rolled back as demand softened in May. Kotak Institutional Equities estimates that all-India average cement prices (adjusted for GST revisions) are estimated to have risen by 4.4 per cent quarter-on-quarter (QoQ) and 1.4 per cent YoY in Q1 FY27. However, Motilal Oswal Financial Services notes that fuel costs (both coal and pet coke) increased sharply by 26-43 per cent YoY amid the West Asia crisis, with average blended realisation estimated to improve only 1 per cent YoY and 2 per cent QoQ to ₹5,521 per tonne. Systematix Institutional Equities estimates average Ebitda per tonne for its coverage universe at ₹848 per tonne, down 14.5 per cent YoY and 5.3 per cent QoQ. Jefferies expects the impact of higher costs to begin flowing through in Q1FY27, with a more meaningful impact expected in Q2, estimating a cumulative cost increase of more than ₹300 per tonne over the first half of FY27.
On the margin front, Motilal Oswal Financial Services expects average earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin to contract by 1.7 percentage points YoY to 15.7 per cent. JM Financial expects its cement coverage universe to post 9 per cent YoY revenue growth, but Ebitda and adjusted profit after tax (APAT) are anticipated to decline by 1.1 per cent and 10.8 per cent YoY, respectively. UltraTech is expected to outperform with an estimated growth of over 14 per cent in adjusted PAT, driven by higher Ebitda and realisations, while UltraTech may also register ready-mix concrete (RMC) revenue growth of 9 per cent YoY and white cement revenue increase of 10 per cent YoY. Jefferies expects UltraTech Cement's absolute EBITDA to rise 10% year-on-year, while Birla Corporation could report a 17% increase. In contrast, Shree Cement's EBITDA is seen declining 7.4%, Dalmia Bharat's by 17%, and Ambuja Cements' by 25%. Despite near-term pressure, the sector's medium- to long-term outlook remains positive underpinned by strong structural demand and industry consolidation.
