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Healthy cement volume growth in Q4; infra-led demand outlook remains strong for FY27E:

Q4FY26 witnessed a strong recovery in cement demand across our coverage universe, with volumes growing 7.8% YoY and 14.2% QoQ, supported by seasonally stronger construction activity and sustained infrastructure-led capex momentum.

Among large-cap companies, JK Cement (JKCE) delivered the highest volume growth at 12.2% YoY, followed by Shree Cement (SRCM) at 9.5% YoY and UltraTech Cement (UTCEM) at 9.0% YoY, reflecting a healthy execution and market share gains.

We expect the demand momentum to remain strong in Q1FY27E, backed by pre-monsoon construction activity. Looking ahead, we forecast industry volume growth of 6–7% in FY27E, driven by continued government infrastructure investment, steady rural demand and resilient housing activity, underpinning sustained growth across the sector.

Price recovery gathers pace, though the monsoon may trigger nearterm moderation:

Cement pricing remained largely stable in Q4FY26, with the average trade prices at ~INR 350/bag, supporting modest realisation growth. Pricing momentum improved in Q1FY27E, with these prices rising ~INR 20–30/bag MoM owing to better pricing discipline. While some moderation is projected during the monsoons, our coverage universe reported blended realisation growth of ~0.4% YoY and 1.2% QoQ in Q4FY26, aided by stable pricing and a richer premium product mix.

Cost inflation weighs on margin despite QoQ recovery in EBITDA:

In Q4FY26, our coverage universe reported EBITDA/t of INR 896, reflecting a decline of INR 98/t YoY, but an improvement of INR 127/t QoQ. The YoY decline was primarily due to higher operating cost, particularly elevated fuel and energy expenses.

Looking ahead, margin pressure is forecast to persist in Q1FY27E and Q2FY27E, with the industry facing an estimated INR 350–400/t increase in overall cost, due to higher fuel, freight and packaging expenses. Unless supported by a meaningful price hike, this cost inflation is likely to exert additional pressure on EBITDA/t and profitability in the near term.

Outlook: Balancing demand recovery, near-term profitability remains a key monitorable:

We remain neutral on the cement sector. While FY27 industry volumes are expected to grow 6–7% YoY, supported by infrastructure and housing demand, near-term profitability remains under pressure due to ~40 MTPA capacity additions and INR 350–400/t cost inflation. Earnings recovery will depend on post-monsoon price hike and improved capacity utilisation, while industry consolidation and strong demand fundamental support long-term outlook.

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