UltraTech Cement gears up for expansion plans and market share gains

UltraTech Cement's profit and margin rose sharply in Q2FY26 as demand, cost controls, and GST 2.0 reforms supported growth; firm eyes 235 mtpa capacity by FY29

UltraTech Cement’s earnings in the second quarter of 2025-26 (Q2FY26) were in line with consensus estimates or slightly lower. Operating profit grew 53 per cent year-on-year (Y-o-Y) to ₹3,090 crore. Operating profit per tonne increased 32 per cent Y-o-Y to ₹914 crore, which was lower than consensus. The operating profit margin (OPM) expanded 3.3 percentage points Y-o-Y to 16 per cent. Net profit increased 75 per cent Y-o-Y to ₹1,230 crore. 

The company management indicated a positive demand outlook, supported by goods and services tax (GST) 2.0, rural demand, urban real estate, infrastructure projects, and private capex. Brand transition is progressing well, with India Cements at 31 per cent and Kesoram at 55 per cent. Full conversion is expected by June 2026. 

The company also announced Phase-IV expansion, with 22.8 million tonnes per annum (mtpa) capacity in northern and western regions. Upon completion, clinker capacity will reach 148 mtpa, with a clinker conversion ratio of 1.6 times (currently 1.48 times), as it is focusing on increasing blended cement production in the mix. The blended realisation was up 4 per cent Y-o-Y while operating expenses (opex) per tonne is flat Y-o-Y. Kesoram’s operating profit per tonne was ₹755. 

The consolidated revenue stood at ₹19,610 crore, up 20 per cent Y-o-Y while operating profit was at ₹3,090 crore, up 53 per cent. Net profit was up 75 per cent to ₹1,230 crore. Sales volume (like-for-like) grew 7 per cent Y-o-Y to 33.9 million tonnes (mt). The ready-mix concrete (RMC) revenue was up 30 per cent, and white cement revenue rose 27 per cent Y-o-Y.

 

The other operating income per tonne stood at ₹70 versus ₹112 in Q2FY25 and ₹64 in Q1FY26. Grey cement realisation improved 4.5 per cent Y-o-Y (down 1.4 per cent quarter-on-quarter or Q-o-Q). Opex per tonne was flat Y-o-Y and up 7 per cent Q-o-Q. Variable costs rose 3 per cent per tonne Y-o-Y. Freight cost per tonne declined 6 per cent Y-o-Y. Blended operating profit per tonne increased 32 per cent Y-o-Y to ₹914 while depreciation and interest cost rose 17 per cent Y-o-Y each, and other Income declined 23 per cent Y-o-Y. The effective tax rate was at 25.1 per cent against 19.5 per cent in Q2FY25 and 26 per cent in Q1FY26.

 

In the first half of 2025-26 (H1FY26), revenue was ₹40,880 crore, up 16 per cent Y-o-Y while operating profit was ₹7,500 crore, up 49 per cent and net profit stood at ₹3,490 crore, up 54 per cent Y-o-Y. The OPM expanded 4 percentage points Y-o-Y to 18 per cent. In H1FY26, the operating cash flow stood at ₹5,570 crore against ₹2,730 crore in H1FY25. The capex in Q1FY26 stood at ₹4,800 crore versus ₹4,440 crore in Q1FY25.

 

Pricing largely remained stable, with the central region witnessing a higher decline. The GST reduction may support premiumisation by making the company’s higher-end brands more accessible to consumers. Lead distance reduced from 370 km to 366 km Q-o-Q. The green power mix stood at 41.6 per cent in Q2FY26 against 38 per cent Y-o-Y and 39.5 per cent Q-o-Q.

 

Total capex guidance for ongoing projects is expected to remain around ₹10,000 crore per year for the next two years (FY26-FY27). Consolidated net debt stands at ₹19,710 crore now versus ₹17,670 crore in March, 2025.

 

The standalone operating profit was below consensus estimates and OPM was slightly lower. The expansion plan will add 22.8 mtpa at a capex of ₹10,500 crore, implying a cost-effective $50 per tonne. This will extend the leadership to 235 mtpa capacity by FY29 — around 32 per cent of capacity.

 

Margin may improve in Q4FY26. The like-for-like volume growth of 6-7 per cent Y-o-Y (including Kesoram and India Cement) beat industry growth rates, and blended realisations increased 1.5 per cent Q-o-Q (up 2.4 per cent Y-o-Y). But costs per tonne increased sharply at 9.1 per cent Q-o-Q, though still 1.2 per cent lower Y-o-Y, and investors were looking at higher blended margins of over ₹1,000 per tonne. The net debt increase was notable. The company could deliver operating profit annually in the range of 22-25 per cent, with better margins/tonne from H2FY26 to FY28. The management remains confident of market-share gain. Brokerages have mixed views on the stock, with both “Buy” and “Sell” recommendations and target prices ranging from a bearish ₹7,600 (Sell) to ₹14,460 (Buy).