IGI Logo

The current global economic uncertainty amidst the tariff war could be a prolonged one. The cement sector’s first-order demand drivers are completely domestic in nature, and hence, the sector remains insulated from the ongoing global uncertainty. Any global linkages on the cost side (petcoke) will be favorable during times of a global risk off mode. We have seen in the past that during times of external uncertainty, the Indian government would focus increasingly on driving domestic demand higher and execute faster on the infrastructure projects underway. In this scenario, despite near-term headwinds (a margin dip is expected in Q1FY26E, although Q4FY25E numbers would be strong), we find the Indian cement sector to be a compelling investment case. We have a Positive rating on the sector and JK Cement and Ultratech Cement continue to be our top picks. Potential incremental government levies on limestone would be a key risk.

Strong seasonally adjusted volume growth: (Ambuja, JK Cement, and Ultratech Cement to lead)

In Q4FY25E, we expect the volume for cement stocks (under coverage) to grow by 22.0% QoQ and 10.2% YoY, led by a broad-based recovery in demand. Key drivers include pre-monsoon construction activity, seasonal government thrust on capex

Among major players, we expect Ambuja Cement to lead with a robust 20% YoY volume growth, benefiting from network ramp-up and market penetration postacquisition synergies. JK Cement is expected to post a healthy 13.5% YoY growth, supported by capacity expansion in the north and central regions. UltraTech Cement, the market leader, is projected to report a 12.8% YoY volume increase, backed by a strong Pan-India presence and ramp-up of recently commissioned units.

Overall, volume growth in Q4FY25E is expected to remain strong across players, reflecting improving demand visibility and enhanced execution on the ground.

We factor in a price increase of ~1.5% QoQ:

Our channel checks indicate that pan-India cement prices rose by ~INR 16/bag in Q4FY25E, driven by a favorable shift in market dynamics and improved demandsupply balance. However, in March 2025, prices were corrected by ~INR 5/bag as companies prioritized volume growth over pricing. Based on these developments, we have factored in a ~1.5% QoQ increase in cement realizations for Q4FY25E across our coverage universe. However, on a YoY basis, realizations are expected to decline by ~3.5%, largely due to the high base of Q4FY24, when prices were at elevated levels

EBITDA/t set to expand QoQ driven by operating leverage, realization, and cost tailwinds:

In Q4FY25E, we expect average EBITDA/t for our coverage universe to improve to INR 936/t, up from INR 713/t in Q3FY25. This sharp uptick is primarily driven by a pan-India increase in cement prices and the industry's continued focus on cost optimization, coupled with strong operating leverage benefits as volumes are expected to grow by 22% QoQ.

Lower costs are driven by a reduction in power and fuel expenses, mainly driven by lower pet coke costs and partly driven by the increasing share of renewable energy. This strategic shift in energy mix would continue to help cushion margin pressures and drive profitability

Q1FY26E margins to come under pressure due to petcoke cost push and negative operating leverage, but we would look through:

 Pet coke prices have been consistently increasing over the last few weeks. At the same time, steam coal prices have been declining by a similar extent during the same period, so some switching is on the cards. We would expect QoQ EBITDA/t to decline as a result of cost push and negative operating leverage. In the absence of a price hike in excess of INR20/bag, we would expect the EBITDA/t to decline QoQ.

For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131