Infra material cos face cost shock amid Iran war; experts see earnings cuts

The escalating US-Iran conflict has sent a ripple through the Indian construction material sector, affecting the cost structures for companies ranging from cement and paints to ceramics and pipes. As the conflict drives up crude oil prices and disrupts global supply chains, analysts said the industry is facing a broad-based inflation shock that threatens to squeeze profit margins just as the new fiscal year begins. 

According to Ace Equity data, cement giants like UltraTech Cement and Ambuja Cements have seen their stock prices slide by 6.2 per cent and 8.3 per cent, respectively, since the onset of the conflict on February 28, 2026, while paint leaders like Asian Paints and Berger Paints have recorded modest gains of 3.7 per cent and 2.7 per cent, though Indigo Paints has slumped by 10.5 per cent. 

 

In contrast, select ceramic players like Kajaria Ceramics and Nitco have shown resilience with gains of 23.1 per cent and 21.2 per cent, respectively, during the same period.   CATCH STOCK MARKET UPDATES LIVE

The energy burden on cement and tiles

For cement manufacturers, the primary concern is the sudden spike in energy costs as the industry relies heavily on imported fuel, which is now becoming significantly more expensive. 

Tushar Chaudhari, research analyst at PL Capital, said the disruption of refineries has led to a sharp increase in imported pet coke prices, from a Q3 average of $118 per tonne to around $160 per tonne now. Cement companies will have to take price hikes to avoid a hit on their margins. He also noted that to survive this, companies will have to increase their usage of domestic pet coke and coal. 

Kotak Institutional Equities warned that despite a temporary ₹147 per tonne margin improvement in Q4FY26, rising costs threaten a ₹300-400 per tonne hit in coming quarters. However, they expect a "high likelihood of substantive price hikes in the next 4-6 weeks to help offset these pressures. 

The tiles and sanitaryware segment is arguably in a tougher spot as the sector is highly energy-intensive and depends on natural gas for kiln operations. Any increase in fuel costs or disruption in gas supply directly and significantly impacts production costs, leading to sharp margin compression, analysts said. 

Khushi Mistry, research analyst at Bonanza, said that volume growth was already weak, and "the Morbi shutdowns will further dent Q4 numbers".  READ | Bharat Wire Ropes zooms 35% in 2 days; what's driving iron & steel stock?

Crude volatility affects paints and pipes

In the paints and pipes sectors, the crisis is felt through the rising cost of petrochemicals. Mistry noted that paints are sensitive to these shifts: "Paints derive 55 per cent of raw materials from crude oil derivatives - every $1 rise in crude cuts Ebitda margins by 0.25 per cent," she added.  

She warned that the real pain will surface in Q1FY27 earnings when 5-10 per cent price hikes kick in and volume growth gets tested. 

Plastic pipes companies face rising PVC resin costs. However, Axis Securities said that they often have "better pricing flexibility," allowing them to pass on these costs to B2B customers with minimal lag.

What lies ahead

Looking ahead, analysts are preparing for potential earnings downgrades. Chaudhari expects that cement will have FY27 Ebitda downgrades to the tune of 7-8 per cent.  

Mistry also believes that the paint sector faces the clearest risk, as premium valuations currently "assume steady earnings growth, not the margin compression currently underway". She highlighted that stocks like Asian Paints and Berger trade at 50–60x multiples, which may be difficult to sustain if margins continue to shrink. 

Despite the near-term pressure, there is a silver lining in valuations. Chaudhari pointed out that valuations have corrected significantly, and in a few smallcap companies, valuations have become attractive. He suggested adding quality stocks on dips, like JK Cement, JK Lakshmi Cement, Dalmia Bharat, Nuvoco Vistas Corp and safer bets like Ambuja Cements and UltraTech Cement, with a long-term view of the Indian infrastructure story. 

Kotak, however, remains more conservative, preferring JSW Cement and Nuvoco due to their "lower valuations versus peers," while cautioning that strong supply additions in the coming years could cap future price increases. 

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