Higher volumes, lower costs positive for UltraTech Cement stock

Market leader UltraTech Cement's Q3FY26 results beat consensus. Consolidated operating profit grew 35 per cent Y-o-Y to Rs 3,920 crore

Cement demand improved in the third quarter of 2025-26 (Q3FY26) and the goods and services tax (GST) rate cut is providing a push while government spending remains key. Prices still lag, given supply overhang. Analysts estimated demand grew 9-10 per cent year-on-year (Y-o-Y) in Q3FY26 (6.5-7 per cent over the first nine months of the financial year, or M9FY26), with rural demand outpacing. Prices softened in September-November 2025 but began recovering in December. Realisations have improved in January, 2026. Imported coal remains soft at $104/tonne while pet coke is near $120/tonne. A change of $10 in either results in ₹30-40 per tonne variation in operating profit.

 

Market leader UltraTech Cement’s Q3FY26 results beat consensus. Consolidated operating profit grew 35 per cent Y-o-Y to ₹3,920 crore. Operating profit per tonne rose 6 per cent Y-o-Y to ₹1,007 while margins rose 170 basis points (bps) Y-o-Y to about 18 per cent. The adjusted net profit grew 32 per cent Y-o-Y to ₹1,790 crore. Consolidated net debt is ₹17,930 crore, down from ₹19,710 crore in September 2025 (₹17,670 crore in March 2025).

 

Management hopes to operate at over 90 per cent capacity in Q4FY26. Expansions, funded entirely by internal accruals, are on schedule. Guidance is for net debt-to-operating profit ratio of below 1 time by FY26 end (1.1 times at Q3-end).

 

Sales volume was up 15 per cent Y-o-Y like-to-like with consolidated revenue reported at ₹21,830 crore (up 23 per cent Y-o-Y), operating profit at ₹3,920 crore (up 35 per cent), and adjusted net profit at ₹1,790 crore (up 32 per cent Y-o-Y). Sales volume was 38.9 million tonnes. RMC (ready-mix concrete) and white cement revenues increased 26 per cent and 6 per cent Y-o-Y, respectively.

 

Blended realisation declined 4 per cent Y-o-Y (down 3 per cent quarter-on-quarter, or Q-o-Q). The grey cement realisation was flat Y-o-Y. But operating expenditure per tonne declined 6 per cent Y-o-Y due to lower variable costs, other expenses, and freight costs. Depreciation rose 19 per cent while cost of finance was up 8 per cent Y-o-Y, and other income dropped 45 per cent Y-o-Y. The effective tax rate was 24.2 per cent, down from 25.2 per cent in Q2FY26 but up versus 19.4 per cent in Q3FY25. The company has also realised ₹200-250 crore from the sale of non-core assets, including a coal mining company in Indonesia.

 

The M9FY26 revenue was up 19 per cent while operating profit rose 44 per cent, and adjusted net profit was up 46 per cent Y-o-Y. The operating profit per tonne grew 23 per cent Y-o-Y to ₹1,042 while operating profit margins expanded 320 bps Y-o-Y to 18 per cent.

 

Lead distance for despatches was 363 kilometres (km), down 13 km Y-o-Y and 3 km Q-o-Q. Green power penetration was 42.1 per cent in Q3FY26, up from 33.4 per cent a year ago and up from 41.6 per cent in Q2FY26. Construction of phase IV expansion is underway. Capex is estimated at ₹9,500-10,000 crore for FY26, with ₹7,200 crore incurred in M9FY26 and rest planned in Q4FY26.

 

Management pointed to improving demand and expects better pricing power in Q4FY26. In North and West, there is focus on transport and logistics while the South is witnessing Metro expansions, information technology (IT) hubs, data centres, and a big push to develop Amaravati. In the East and Central, roads offer visibility along with affordable housing.

 

The management says brand conversion in Kesoram hit 69 per cent by December 2025, and it has crossed 58 per cent in India Cements. Full rebranding of Kesoram Cement will be done by June 2026. UltraTech has started a cost improvement capex programme, with ₹260 crore spent out of the committed ₹380 crore. Benefits will be visible from Q4FY27. Kesoram’s operating profit per tonne declined Q-o-Q to ₹600 in Q3FY26 from ₹755 in Q2FY26 due to ongoing integration and transition-related costs, but the management is confident margins will improve.

 

India Cements also has a cost improvement capex programme underway, with ₹140 crore spent out of a committed ₹600 crore, and results will be visible from Q4FY27. The management maintained its guidance of ₹1,000 per tonne operating profit by Q4FY27 in India Cements.

 

UltraTech hopes to deliver savings of ₹100 per tonne in FY26. In Q4FY26, 8-9 million tonnes per annum (mtpa) of new capacity is to be commissioned, followed by 12 mtpa in FY27. The cable & wire project should see product launches by Q3FY27.

 

Volume growth and cost reduction were both positives. UltraTech remains the leader in a crowded field.