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Q2FY27E: Seasonal volume dip, but H2 recovery to support a positive sector outlook:

We expect the cement companies under our coverage universe (11 companies) to report an aggregate volume growth of ~6.3% YoY in Q2FY27E, despite a ~7.6% sequential decline, primarily reflecting the seasonal slowdown in construction activity due to uneven rainfall and labour-related challenges. We expect a gradual recovery in demand in H2FY27, supported by infrastructure spending and improving pricing, although the pace may remain measured amid softer real estate activity

Within our coverage universe, JKCE is projected to lead volume growth at ~22.2% YoY, followed by UTCEM at ~12.4% and NUVOCO at ~9.0%. These players' strong performance is estimated to translate into stronger underlying demand and support better earnings momentum as sector activity improves in H2FY27.

Overall, we remain cautiously positive on the sector after Q2FY27, with improving volume and price providing a potential earnings recovery trigger in H2FY27.

Outlook: Volume recovery intact; cost inflation to cap FY27 margin:

We remain constructive on the cement sector, with demand anticipated to grow 6–7% YoY in FY27, supported by infrastructure spending, housing and improving post-monsoon construction activity. However, the West Asia crisis impacted inflation in petcoke, coal, diesel and freight cost is likely to keep profitability under pressure in H1FY27, while ~50 MTPA capacity addition in FY27E may limit pricing power in select regions. We expect partial cost pass-through, supported by a price hike, with margin likely to recover in H2FY27E as demand improves and input cost stabilises. Overall, FY27E should be a year of earnings normalisation rather than sharp margin expansion, favouring large integrated players with superior cost structures and stronger pricing power.

Pricing remains muted; gradual recovery expected in H2FY27:

Our channel checks suggest pan-India cement prices remained largely flat QoQ in Q2FY27, as attempted price hike failed to sustain amid seasonal demand weakness and heightened competitive intensity. Non-trade price witnessed a sharper correction of INR 15–20/bag in select East and Central markets, indicating continued pricing pressure. Going forward, pricing is forecast to improve gradually rather than sharply. FY27E realisation is expected to improve by ~5%, supported by demand recovery and a higher capacity utilisation. Sustained price hike, however, will depend on utilisation crossing ~75% and moderation in competitive intensity

EBITDA/t likely to bottom out in Q2FY27; recovery hinges on cost:

We forecast average EBITDA/t for our coverage universe at ~INR 701/t in Q2FY27E, down from ~INR 879/t in Q2FY26, primarily due to elevated fuel and freight cost. Muted pricing in Q2FY27 is unlikely to provide meaningful offset to the sharp increase in operating cost, thereby keeping margin under pressure.

Q3FY27E margin should improve sequentially, supported by better demand and potential pricing recovery; however, the pace of recovery is estimated to remain gradual. Further increases in petcoke/coal prices or power cost remain key risks to margin recovery

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