Muted volumes, realisation miss weigh on Shree Cement in Q3 FY26

Muted volumes and a miss on realisations weighed on Shree Cement's operating performance in Q3 FY26, even as lower depreciation helped lift net profit year-on-year

Shree Cement Ltd (SCL) reported an average third quarter in 2025-26 (Q3FY26). While revenue and net profit increased by 4 per cent and 21 per cent year-on-year (Y-o-Y), respectively, operating profit dropped 9 per cent Y-o-Y. Volume improved marginally by 2 per cent Y-o-Y. The net profit was up at ₹279 crore versus ₹229 crore in Q3FY25.

 

The operating profit margin fell to 19.5 per cent compared to 22.3 per cent Y-o-Y. The volume was 8.95 million tonnes per annum, up 2 per cent Y-o-Y. The operating profit per tonne stood at ₹962, down 11 per cent Y-o-Y. The blended realisation per tonne of ₹4,937, was down 10 per cent quarter-on-quarter (Q-o-Q) and 4 per cent Y-o-Y although cost per tonne declined by 7 per cent Q-o-Q to ₹3,975 per tonne. Depreciation costs declined 22 per cent which boosted net profit.

 

Apart from capacity expansion, SCL is focusing on margin expansion. This translates to higher share of premium portfolio, increasing green energy adoption, optimising supply chain, and refining pricing strategy. It is already among the lowest-cost producers. The operating profit margins are expected to rebound to around 23.5 per cent while operating profit per tonne is projected to reach ₹1,250 if targets are met.

 

Shree Cement's capex continues with current installed capacity of 65.8 million tonnes per annum or MTPA, and ongoing projects planned to push it to 68.8 MTPA by the end of FY26 and 72 MTPA by FY27. This implies annual volume growth of around 5 per cent over FY25-FY27. But utilisation levels are low. 

 

Capex planned for FY26 is ₹2,000 crore, which will be funded through internal accruals. Capex in FY25 was ₹3,470 crore. During 9MFY26, the company incurred ₹1,500 crore in capex.  

 

Every cement major is in expansion mode with the industry expecting demand to grow at near 8 per cent. Further consolidation is expected to benefit large players and SCL's edge in pricing, good balance sheet and supply chain efficiency, could be useful in the war for market share. 

 

The management indicated demand has picked up since December and continues to be robust. Cement prices have also improved. The focus remains on profitable growth rather than pure volume. SCL is well-positioned in its key North and East India markets while making inroads in the South. 

 

SCL reported a 2 per cent volume growth but premium products accounted for 22 per cent of total trade cement sales in Q3FY26, up from 15 per cent in Q3FY25. Capacity utilisation stood at 55 per cent while the trade and non-trade mix was 65 per cent and 35 per cent, respectively. Blended cement sales comprised 65 per cent of total sales.

 

The blended realisation declined by 4 per cent Y-o-Y and declined 10 per cent Q-o-Q to ₹4,937 per tonne. The ready mix concrete sales jumped 140 per cent. The fuel mix comprised 76 per cent pet coke, with the balance from alternative fuels and coal. On a kilocalorie basis, fuel cost stood at ₹ 1.56, which may rise a little in Q4 but is the least in industry.  

 

The share of green electricity in total electricity consumption stood at 60 per cent in Q3FY26, which is one of the highest in the cement industry. SCL is ramping up green capacity, which stood at 634.5 megawatt or MW at the end of 9MFY26, up 32 per cent vis-à-vis 480 MW at the beginning of FY24-FY25. The freight costs declined by 1 per cent Q-o-Q and 1 per cent Y-o-Y to ₹1,145 per tonne. The company aims to reduce lead distances and is working on rail connectivity for most of its plants. It plans to transport 25 per cent of total production via rail to optimise logistics costs. The current rail-to-road transport mix is at 11:89 with lead distance at 446 km.

 

SCL has lost market share to peers, which is cause for concern. But a strong balance sheet and strong cost leadership should support margins. Several analysts have downgraded their recommendations and valuations. Shree Cement Ltd (SCL) reported an average third quarter in 2025-26 (Q3FY26). While revenue and net profit increased by 4 per cent and 21 per cent year-on-year (Y-o-Y), respectively, operating profit dropped 9 per cent Y-o-Y. Volume improved marginally by 2 per cent Y-o-Y. The net profit was up at ₹279 crore versus ₹229 crore in Q3FY25.

 

The operating profit margin fell to 19.5 per cent compared to 22.3 per cent Y-o-Y. The volume was 8.95 million tonnes per annum, up 2 per cent Y-o-Y. The operating profit per tonne stood at ₹962, down 11 per cent Y-o-Y. The blended realisation per tonne of ₹4,937, was down 10 per cent quarter-on-quarter (Q-o-Q) and 4 per cent Y-o-Y although cost per tonne declined by 7 per cent Q-o-Q to ₹3,975 per tonne. Depreciation costs declined 22 per cent which boosted net profit.

 

Apart from capacity expansion, SCL is focusing on margin expansion. This translates to higher share of premium portfolio, increasing green energy adoption, optimising supply chain, and refining pricing strategy. It is already among the lowest-cost producers. The operating profit margins are expected to rebound to around 23.5 per cent while operating profit per tonne is projected to reach ₹1,250 if targets are met.

 

Shree Cement's capex continues with current installed capacity of 65.8 million tonnes per annum or MTPA, and ongoing projects planned to push it to 68.8 MTPA by the end of FY26 and 72 MTPA by FY27. This implies annual volume growth of around 5 per cent over FY25-FY27. But utilisation levels are low. 

 

Capex planned for FY26 is ₹2,000 crore, which will be funded through internal accruals. Capex in FY25 was ₹3,470 crore. During 9MFY26, the company incurred ₹1,500 crore in capex. 

 

Every cement major is in expansion mode with the industry expecting demand to grow at near 8 per cent. Further consolidation is expected to benefit large players and SCL's edge in pricing, good balance sheet and supply chain efficiency, could be useful in the war for market share. 

 

The management indicated demand has picked up since December and continues to be robust. Cement prices have also improved. The focus remains on profitable growth rather than pure volume. SCL is well-positioned in its key North and East India markets while making inroads in the South. 

 

SCL reported a 2 per cent volume growth but premium products accounted for 22 per cent of total trade cement sales in Q3FY26, up from 15 per cent in Q3FY25. Capacity utilisation stood at 55 per cent while the trade and non-trade mix was 65 per cent and 35 per cent, respectively. Blended cement sales comprised 65 per cent of total sales.

 

The blended realisation declined by 4 per cent Y-o-Y and declined 10 per cent Q-o-Q to ₹4,937 per tonne. The ready mix concrete sales jumped 140 per cent. The fuel mix comprised 76 per cent pet coke, with the balance from alternative fuels and coal. On a kilocalorie basis, fuel cost stood at ₹ 1.56, which may rise a little in Q4 but is the least in industry.  

 

The share of green electricity in total electricity consumption stood at 60 per cent in Q3FY26, which is one of the highest in the cement industry. SCL is ramping up green capacity, which stood at 634.5 megawatt or MW at the end of 9MFY26, up 32 per cent vis-à-vis 480 MW at the beginning of FY24-FY25. The freight costs declined by 1 per cent Q-o-Q and 1 per cent Y-o-Y to ₹1,145 per tonne. The company aims to reduce lead distances and is working on rail connectivity for most of its plants. It plans to transport 25 per cent of total production via rail to optimise logistics costs. The current rail-to-road transport mix is at 11:89 with lead distance at 446 km.

 

SCL has lost market share to peers, which is cause for concern. But a strong balance sheet and strong cost leadership should support margins. Several analysts have downgraded their recommendations and valuations.