Axis Securities said the cement sector has kicked off FY26 on a strong footing, with Q1 results surpassing expectations across key financial metrics. Robust demand, sustained pricing power, and disciplined cost management have underpinned the sector’s performance. Axis Securities highlighted that select market leaders now offer compelling risk-reward opportunities, making it an ideal time for investors to position their portfolios ahead of a sustained upcycle.
Top Conviction Ideas – Act Now
Axis Securities said its preferred picks in the cement space combine strong balance sheets, efficient operations, and capacity expansion pipelines that position them to capture incremental demand. UltraTech Cement Ltd, with a buy rating and target price of ₹13,840, stands out for its operational scale. Ambuja Cements Ltd, rated buy with a target of ₹660, is well-positioned to benefit from pricing discipline and demand recovery. Dalmia Bharat Ltd, with a buy rating and target price of ₹2,550, and JK Lakshmi Cement, rated buy with a target of ₹1,050, round out the top picks. Axis Securities said building exposure to these names now can potentially deliver outsized returns over the next 12–18 months.
Cement Sector Q1 Review – Higher Prices Boost Profitability
Axis Securities said companies under coverage posted strong Q1FY26 financial performance, with year-on-year growth of 10% in volumes, 16% in revenue, 40% in EBITDA, and 45% in PAT, exceeding expectations. EBITDA margins expanded by 350 bps YoY, supported by higher realisations (+4% YoY) and volume growth (+10% YoY), resulting in EBITDA per tonne of ₹1,070, a 30% increase YoY. Blended realisations improved to ₹5,510 per tonne, while cost per tonne declined 1% YoY to ₹4,441, aided by a 7% drop in power and fuel costs. Axis Securities said performance was broad-based, with JK Cement, JK Lakshmi, Ambuja, and UltraTech leading volumes, while Dalmia Bharat and Shree Cement delivered superior margins. Capacity expansion momentum continued, with UltraTech, Shree, and Ambuja commissioning a combined 14.5 mtpa in Q1, and Dalmia Bharat announcing a further 6 mtpa expansion. Management commentary indicated stable cement prices post-Q1, with demand expected to strengthen through FY26, driven by government infrastructure projects and a recovery in housing, industrial, and commercial sectors.
Outlook – Growth Momentum Intact
Axis Securities said input costs remain supportive, with power and fuel costs down 7% YoY to ₹1,010/tonne, partially offsetting marginal raw material cost increases. Cement demand is expected to remain strong in FY26, fueled by infrastructure spending, steady housing demand, and rural consumption recovery. High single-digit volume growth is anticipated, with ~40 mtpa of new capacity additions in FY26 versus 30–35 mtpa in FY25, reflecting confidence in long-term demand. The brokerage forecasted a 7–8% CAGR demand growth over FY24–27E, highlighting that sector consolidation will enhance economies of scale, supply chain efficiency, and pricing discipline among large players.
Key Monitorables
Axis Securities said investors should track price realisations, input cost trends, and the pace of demand recovery, particularly ahead of the festive season and peak construction activity in H2FY26. Stability in power and fuel costs and sustained pricing will remain critical to margin resilience.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
