Muted Q3 pricing, volume strength to anchor cement sector outlook: Jyoti Gupta

Cement prices exited the December quarter on a softer footing compared with the previous quarter, but strong underlying demand and rising volumes continue to provide structural support to the sector, according to Jyoti Gupta from Nirmal Bang Institutional. Channel checks suggest that while near-term realisations remain volatile due to capacity additions and cost pressures, the medium-term outlook is constructive as consolidation deepens and operating leverage improves.

Responding to ET Now on pricing trends, Gupta noted that “quarter three FY26 cement realisations have been muted, with prices declining by roughly around 2%, could be slightly higher, sequentially across our coverage universe.” Profitability was impacted by multiple factors, including a 10% cut in state GST rebates and a sharp 24% rise in petcoke prices. These pressures were partially offset by operating leverage benefits that helped reduce freight, other expenses and employee cost per tonne.

Although coal prices fell by around 22%, the benefit was limited as coal accounts for only about 35% of overall fuel consumption at a pan-India level. As a result, Gupta expects EBITDA per tonne to decline by roughly ₹75 to ₹125 sequentially, depending on the fuel mix of individual companies.

Early Signs of Price Hikes in Q4

On regional pricing trends, Gupta said price hikes have begun to emerge in the March quarter, particularly in non-trade segments. “There has been around ₹35 to ₹40 across regions… south was something around ₹30 to ₹35, north is…, broadly almost the entire region saw an increase of somewhere around between ₹25 to almost ₹35-40,” she said, referring to non-trade prices.

Trade prices, however, may take longer to reflect these increases. With festive demand around Makar Sankranti in the south and west, absorption could be delayed, and clarity is expected only after a week or more of deeper market penetration.

Despite near-term volatility, Gupta emphasised that the sector is firmly in a volume-led cycle, where strong demand is lifting utilisation levels and gradually improving cost structures. That said, large capacity additions across the industry are capping pricing power, keeping realisations volatile in the short term. Over time, consolidation and scale advantages among top producers are expected to lead to better pricing discipline and more stable profitability.

Strong Volume Trajectory into Q4
Cement demand momentum remains healthy. Gupta highlighted that volume growth stood at around 11% in Q1, 7.4% in Q2, and is likely to be over 9% in Q3. For Q4 FY26, traditionally a seasonally strong quarter, she expects 8–9% growth, driven by robust construction activity.

Large players such as Ambuja, UltraTech and JK Cement have been leading the volume growth, underscoring continued market share consolidation in favour of well-capitalised groups. UltraTech, in particular, is expected to remain the industry anchor, with volumes likely to exceed 35 million tonnes for the quarter, while ACC and Ambuja are seeing strong momentum post integration.

Stock Preferences and Demand Drivers
Within the sector, Gupta’s preferences remain clear. Ambuja Cement is her top pick among large caps, Ramco Cement in midcaps, and Nuvoco in the small-cap space.

On demand trends, she pointed out that real estate activity remains strong in the luxury and ultra-luxury segments, while affordable housing growth is relatively muted. Infrastructure demand continues to be a key driver, with the south leading, followed by the north, west, east and central regions. Defence-related capex and large, complex infrastructure projects are increasingly contributing to cement demand, particularly in the south and north, while the northeast is benefiting from sustained government spending.

Consolidation to Reshape the Industry
Even after recent mergers, Gupta believes UltraTech Cement will continue to be the market anchor, given its pan-India presence, strong brand and deep retail reach. While ACC and Ambuja are strengthening their positions and gaining market share, smaller players are likely to come under pressure.

She expects consolidation to accelerate further, with large, well-capitalised companies expanding through both organic capacity additions and acquisitions. Over time, this should result in a more consolidated industry structure, improved pricing discipline and structurally stronger profitability.

While near-term pricing remains choppy, the cement sector’s long-term fundamentals remain intact, supported by strong volumes, consolidation-led efficiencies and sustained infrastructure demand.