No near-term triggers for building materials as Q2 growth stays muted

Building materials companies logged mid single-digit Q2FY26 growth amid monsoon disruption, weak retail demand. Brokerages remain split on an H2 rebound as pricing, PVC and competition stay in focus

The building material space continues to be hit by demand hurdles, weighing on growth prospects for yet another quarter. The sector posted mid-single-digit sales growth in the second quarter (July-September/Q2) of 2025-26 (FY26), with plastic pipes and the medium-density fibreboard (MDF) segment posting 8–9 per cent growth, while bathware and plywood segments grew below 5 per cent. Brokerages have a mixed view on the sector, with some expecting a recovery in the second half (H2) of FY26, while others remain cautious on the outlook.

 

Analyst Utkarsh Nopany of BOB Capital Markets points out that Q2 revenue growth for its building material universe remained muted for the 11th consecutive quarter. The sector rose at a slow pace of 7.4 per cent year-on-year (Y-o-Y) in Q2FY26 due to the impact of heavy monsoon on construction activity and weak demand in the retail segment. Operating profit margins, however, were up by 180 basis points (bps) Y-o-Y to 12.6 per cent in Q2FY26, mainly due to a weak base effect.

 

BOB Capital Markets continues to prefer pipes and bathware over tiles and wood panels, considering relatively better pricing discipline on account of high organised share and low global linkage. Cera Sanitaryware, Finolex Pipes and Somany Ceramics are its top picks in the sector.

 

Nuvama has a cautious view on the plastic pipe sector. In a recent report, the company pointed out that the sector continues to reel under demand weakness, elevated competition, increased capacity additions, pressure on polyvinyl chloride (PVC) prices and rising consolidation.

 

What has compounded matters, according to analysts at the brokerage led by Sneha Talreja, is the lack of anti-dumping duty and the withdrawal of Bureau of Indian Standards quality norms on PVC, which have weighed on PVC prices, expected to fall another ₹3–4 soon. This may lead to volume weakness as the channel hesitates to stock up in a falling price scenario, resulting in inventory losses, a fierce price war and industry consolidation. Factoring this in, the brokerage has cut earnings-per-share and price-to-earnings multiples across pipe names and maintained its cautious stance on the sector.

 

Nuvama has retained a ‘hold’ rating on Astral with a target price of ₹1,412. It has downgraded Supreme Industries to ‘hold’ with a target price of ₹3,529. It has retained a ‘reduce’ rating on Finolex, Prince Pipes and Apollo Pipes with target prices of ₹175, ₹208 and ₹198, respectively.

 

Motilal Oswal is positive on the wood panel and tile and bathware segments. It expects a revival in H2FY26. Analysts Ashish Poddar and Krisha Zaveri of Motilal Oswal believe the revival will be underpinned by low unsold housing inventory and spillover of project launches from 2024-25 into FY26. 

 

The industry, according to the brokerage, is poised to benefit from the expansion of the real estate sector, increased government focus on infrastructure and housing, growing premiumisation and urbanisation, and implementation of Bureau of Indian Standards norms that promote quality manufacturing. The brokerage has a ‘buy’ rating on Century Plyboards and Kajaria Ceramics and a ‘neutral’ rating on Cera Sanitaryware, with target prices of ₹958, ₹1,253 and ₹5,842, respectively.

 

Axis Securities also believes that a demand pickup will come through after festivities, a period traditionally strong for home renovations. Government expenditure is expected to rise gradually, and catalysts such as the 8th Pay Commission and potential rate cuts should unlock further value for the sector. Disposable incomes and the recovery of real estate project completions remain key monitorables, it says.