Q1 results preview: Cement makers build on volumes, hit margin wall

Strong infrastructure demand and a favourable base are expected to drive Q1 FY27 cement volumes, but rising fuel and input costs may weigh on margins despite better realisations

Top Indian cement firms are expected to report healthy volume growth in the first quarter (April-June/Q1) of 2026-27 (FY27), driven by robust infrastructure activity, a delayed monsoon, and a favourable year-ago base. However, a sharp rise in fuel and other input costs following geopolitical tensions in West Asia is likely to weigh on profitability, limiting the benefits of better realisations.

 

“The quarter is expected to be reasonably healthy from a demand perspective, with volume growth of around 8.2 per cent year-on-year (Y-o-Y). However, profitability is likely to come under marginal pressure sequentially because of rising input costs and operating deleverage,” said Raghav Maheshwari, research analyst at Equirus Securities.

 

Industry volumes are estimated to rise, supported by demand from infrastructure and institutional projects, even as trade demand in Tier-III and Tier-IV cities, along with rural markets, remains relatively modest. A delayed onset of the monsoon also extended the construction season in several parts of the country, supporting cement demand.

 

According to analysts at JM Financial, volume growth is likely to be led by UltraTech Cement, Shree Cement, and JK Cement, each expected to register strong double-digit growth of more than 10 per cent Y-o-Y, outperforming the industry on the back of capacity additions and market share gains.

 

Dalmia Bharat is expected to post 9 per cent Y-o-Y growth. In contrast, Ambuja Cements is likely to report a 7 per cent Y-o-Y decline in volumes. Ambuja is expected to be an outlier due to market share loss and a slower-than-expected rampup of acquired assets, according to Maheshwari. 

 

Maheshwari added that volume growth in Q1FY27 should be supported by a favourable base, as Q1 of 2025-26 was affected by early rainfall. Regionally, demand was strongest in the North, followed by the Central, West, East, and South, according to a report by 360 One Capital.

 

Cement companies implemented multiple price hikes during the quarter to offset rising costs, although several increases were rolled back as demand softened in May. According to Akshay R Shetty, equity research analyst at Mirae Asset Sharekhan, some regions witnessed weaker demand due to labour shortages, heatwaves, and the election period.

 

According to Kotak Institutional Equities, all-India average cement prices (adjusted for goods and services tax revisions) are estimated to have risen 4.4 per cent quarter-on-quarter (Q-o-Q) and 1.4 per cent Y-o-Y in Q1FY27.

 

Despite the improvement in pricing, analysts expect earnings to remain under pressure as increases in petroleum coke (petcoke), imported coal, diesel, and packaging costs limit the benefits of better realisations. Average blended realisation is estimated to improve by 1 per cent Y-o-Y and 2 per cent Q-o-Q to ₹5,521 per tonne, according to Motilal Oswal Financial Services.

 

The brokerage further said fuel costs (coal and petcoke) increased sharply by 26-43 per cent Y-o-Y in Q1FY27 amid the West Asia crisis. Average earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin is estimated to contract by 1.7 percentage points Y-o-Y to 15.7 per cent.

 

JM Financial expects its cement coverage universe to post 9 per cent Y-o-Y revenue growth, backed by higher volumes and better realisations. However, Ebitda and adjusted profit after tax (APAT) are expected to decline 1.1 per cent and 10.8 per cent Y-o-Y, respectively, in Q1FY27. 

 

The country's largest cement-maker UltraTech, is expected to report PAT growth of about 11 per cent, driven by higher Ebitda and better realisations. According to Motilal Oswal Financial Services, UltraTech may also register 9 per cent Y-o-Y growth in readymix concrete revenue, while white cement revenue is expected to rise 10 per cent Y-o-Y.

 

India Ratings & Research said the sector profitability is likely to decline during the quarter as recent price hikes would not be sufficient to offset higher production costs. However, the recent correction in crude oil and petcoke prices could provide some relief over the next few quarters.

 

While the June quarter is expected to reflect only a partial impact of higher fuel costs because companies consumed lower-cost inventory for part of the period, several brokerages warned that cost pressures are likely to peak in the second quarter (July-September/Q2) before easing in the second half of FY27 as fuel prices moderate.

 

Anand Kulkarni, director at Crisil Ratings, said, “The impact of elevated fuel costs on earnings is likely to be felt with a lag, with only the later part of the quarter facing the full impact, as cement manufacturers typically maintain two to three months of fuel inventory.”

 

Systematix Institutional Equities estimates average Ebitda per tonne for its coverage universe at ₹848, down 14.5 per cent Y-o-Y and 5.3 per cent Q-o-Q, as cost inflation outweighs the benefits of better realisations.

 

Analysts remain cautious about the near-term outlook as the monsoon season typically weakens demand and limits the scope for further price hikes. They expect infrastructure spending and continued market share gains by large players to support mid-single-digit demand growth for the full year, with margins likely to recover in the second half if fuel prices remain benign.