Mixed Q3 seen for building materials; wood panels to lead: Elara Capital

Elara Capital analyst Amit Purohit said some players in the sector could still deliver double-digit volume growth despite broader demand headwinds.

Elara Capital on building material sector: A mixed demand environment is expected to persist across the building materials sector in the December quarter (Q3FY26), with overall demand remaining soft even as select companies report strong volume growth and market share gains, according to Elara Capital. Performance across segments is likely to diverge, driven by company-specific strategies and category-level dynamics.

 

Analyst Amit Purohit of Elara Capital said some players in the sector could still deliver double-digit volume growth despite broader demand headwinds. Within Elara’s building materials coverage universe, Astral and Century Plyboards are expected to report double-digit volume growth during the quarter, supported by market share gains.

 

Tiles under pressure; wood panels show resilience

Demand conditions remain challenging for the tiles segment, weighed down by muted domestic activity and weak exports, the brokerage said. Geopolitical tensions and elevated US tariffs are likely to impact tile exports, resulting in subdued performance for the sector. Contrastingly, wood panels are expected to show resilience, led by steady MDF demand and market share gains in plywood.  ALSO READ | Elara Capital expects strong Q3 for Ports & Logistics cos; check top picks

Paints face weak demand, intense competition

The paints segment continues to face pressure from weak demand and elevated competitive intensity. Elara said aggressive pricing and higher trade incentives are restricting growth prospects for incumbents, limiting the likelihood of double-digit value growth. The brokerage reiterated its cautious stance on the paints space, citing persistent challenges in demand recovery and sustained competition.

 

Among individual stocks, Century Plyboards is expected to benefit from healthy MDF demand and continued market share gains, supported by brand investments and loyalty programmes for intermediaries and influencers. Growth at Astral is being driven by market share gains in plastic pipes, even as the earlier non-implementation of anti-dumping duties impacted PVC prices. Elara noted that PVC prices have risen by ₹1 per kg effective January 2026, which should support performance in Q4FY26.

 

Competitive intensity in paints remains high. The quarter saw increased aggression from Birla Opus through higher in-bill discounts, while Asian Paints focused on smaller dealers by offering higher incentives. Elara expects Asian Paints and Berger Paints to report modest sales growth of 4.6 per cent and 2.7 per cent, respectively, in Q3FY26E.  ALSO READ | SBI hits new high in weak market, mcap nears ₹9.5 trn; will touch ₹10 trn?

Margins to remain broadly stable

On margins, Ebitda margins for Elara’s building materials coverage universe are expected to remain broadly stable in Q3FY26, rising around 25 basis points year-on-year. Margin gains in wood panels and plastic pipes are likely to be offset by weakness in tiles. Tile Ebitda margins are expected to improve 185 bps Y-o-Y to 13.3 per cent, followed by a 149 bps Y-o-Y increase in wood panels, while paints margins may decline by about 12 bps Y-o-Y. 

 

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