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Tepid quarter

The building materials sector witnessed subdued demand in 1QFY26 with June being further impacted by the early onset of the monsoon. We estimate that our coverage companies’ aggregate revenue/ EBITDA could grow by ~4%/ ~3% YoY; however, PAT may decline by ~3% YoY. We expect the tiles industry to have witnessed subdued demand in both domestic and exports. Additionally, higher competitive intensity could further weigh on realisation/ margins. In the wood panel segment, there are ongoing concerns around overcapacity in MDF segment and high timber prices on YoY basis. Recently, timber prices have started easing sequentially with new plantations coming in; however, higher competitive intensity will keep discounting at elevated levels for industry players.

* Tile demand remains muted; Morbi remains a pain-point: We expect the tiles industry to have witnessed subdued demand in both domestic and exports. Additionally, oversupply challenges are weighing further on overall sector performance. We estimate tile companies to report volume growth of ~3-4% YoY. Overall, we expect 80-90bps YoY margin contraction, though it should improve sequentially led by cost control. We expect tiles companies to report 4% YoY dip in EBITDA and 9% YoY decline at PAT level.

* Wood panel sector continues to face margin headwinds: The implementation of BIS regulations—permitting only ISI-certified MDF imports—has led to a significant decline in imports. Additionally, lower domestic MDF prices have made imports less attractive, further supporting the shift toward domestic products. The wood panel segment continues to face margin pressures due to elevated timber prices and oversupply in the MDF segment. However, a slight easing in timber costs over the past few months offers some relief. Going forward, we anticipate improvement in volume growth underpinned by robust real estate demand.

* 1QFY26 to remain subdued: We estimate that our coverage companies’ aggregate revenue/ EBITDA will grow by 4%/ 3% YoY; however, PAT may decline by ~3% YoY. The weakness is largely driven by soft demand in the tiles segment, impacted by weak exports, and sustained pressure on wood segment margins due to high timber prices.

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