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Earnings beat led by higher volume and cost efficiencies

* India Cements’ (ICEM) 2QFY27 EBITDA jumped ~78% YoY to INR1.4b (~32% beat, led by higher volume and lower variable cost/t vs. estimates). EBITDA/t increased ~53% YoY to INR511 (vs. est. INR409). OPM expanded 5.4pp YoY to ~13% (vs. est. ~11). PAT grew 2.6x YoY to 388m (vs. estimate of INR138m).

* ICEM’s improved operational efficiencies and higher capacity utilization are driving YoY earnings growth. Capacity utilization stood at ~78% vs. ~66% in 2QFY26. Cost efficiencies were driven by an improved clinker conversion ratio (1.55x vs. 1.45x YoY), a higher WHRS/renewable power share (~7%/25% vs. ~6%/7% YoY), lower power consumption/t of cement (~76 kwh vs. ~87 kwh), and positive operating leverage. However, a sharp rise in fuel prices led to ~14%/9% YoY/QoQ increase in fuel costs. Upgradation work has commenced across plants and is expected to continue through 2HFY27.

* We have raised our EBITDA/PAT estimates for FY27 by ~7%/22%, factoring in a beat during the quarter, while maintaining our earnings estimates for FY28E. We value ICEM at 11x FY28E EV/EBITDA to arrive at a TP of INR250. Reiterate Sell.

Volume up ~16% YoY; EBITDA/t at INR511 (est. INR409)

* ICEM’s revenue/EBITDA/PAT increased ~2%/78%/2.6x YoY to INR11.4b/INR1.4b/INR388m (up ~9%/32%/2.8x vs. our estimates) in 2QFY27. Volume rose ~16% YoY (+5% vs. estimate) to 2.8mt. Cement realization/t (net of freight) rose ~1% YoY (down ~1% QoQ).

* Opex/t declined ~17% YoY (~1% above estimates). Variable cost/t increased ~3% YoY, while other expense/t declined ~9% YoY. Employee cost declined ~22% YoY to INR449m. Fuel cost per kcal stood at INR2.15 vs. INR1.74/INR1.96 in 2QFY26/1QFY27. Petcoke’s share in the fuel mix stood at 16% vs. 57%/22% in 2QFY26/1QFY27. EBITDA/t rose ~53% YoY to INR511.

* In 1HFY27, revenue/EBITDA grew ~1%/84% YoY to INR21.6b/INR3.0b, led by volume (up ~17% YoY to 5.4mt) and EBITDA/t (up ~57% YoY to INR555). CFO stood at INR3.1b vs. operating cash outflow of INR338m in 1HFY26. Capex stood at INR6.3b vs. INR2.2b in 1HFY26. Net cash outflow was INR3.3b vs. INR2.6b in 1HFY26. Net debt stood at INR15.9b vs. INR12.7b as of Mar’26.

Valuation and view

* ICEM’s profitability improved YoY, driven by an increase in capacity utilization and cost-saving initiatives. However, elevated fuel prices and relatively subdued price hikes remain key near-term challenges. Additionally, continued capacity additions across the industry are intensifying competitive pressures. ICEM is also expanding its grinding capacity by 3.1mtpa to 17.6mtpa by FY28E

* We estimate EBITDA CAGR of ~49% over FY26-28, and EBITDA/t of INR568/INR717 in FY27/FY28 vs. INR385 in FY26. The stock is currently trading at 13x FY28E EV/EBITDA. We value ICEM at 11x FY28E EV/EBITDA to arrive at our TP of INR250. Reiterate Sell.

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