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Cement Sector: Companies witnessed significant improvement in profitability on YoY basis

ICICIdirect Research 25 Jul 2025 DISCLAIMER

Operational performance of cement companies has improved significantly on YoY basis during Q1FY26, mainly on account of healthy volume growth along with improvement in realizations and favorable cost structure.
Considering the quarterly performance of companies, which have reported results so far, aggregate revenue growth stands at ~15% YoY for Q1FY26, led by ~8% YoY growth in volumes and ~7% YoY improvement in realization.
JK Cement’s volume growth stood at ~15% YoY followed by Sagar Cement (~11% YoY growth) and UltraTech Cement (~10% YoY growth). The healthy volume growth of JK Cement and UltraTech Cement was mainly driven by timely capacity additions along with better demand as compared to last year. Sagar Cement’s volume growth was mainly driven by considerable improvement in capacity utilization of its existing units in Andhra Pradesh.
Dalmia Bharat reported ~5% YoY decline in volumes as the company remained focused on pricing-led growth. Also, they had some additional volume last year in Q1FY25 from tolling arrangement with Jaypee.
In terms of EBITDA/ton, all four companies have witnessed significant improvement on YoY basis, mainly led by higher realizations and stable cost structure. Average EBITDA/ton of these four companies stands at ~Rs 1200/ton in Q1FY26, which is ~Rs 300/ton higher on YoY basis.
Sagar Cement’s EBITDA/ton improved significantly to Rs 851/ton (+Rs 487/ton YoY). Dalmia Bharat reported EBITDA/ton of Rs 1261/ton (+Rs 357/ton YoY). UltraTech Cement’s EBITDA/ton improved to Rs 1197/ton (+Rs 292/ton YoY) while JK Cement reported EBITDA/ton of Rs 1226/ton (+Rs 229/ton YoY).
Future outlook for the sector remains constructive in terms of demand and prices. After witnessing a muted ~4% YoY demand growth in FY25, cement demand has picked-up and expected at ~7% CAGR over the next 4-5 years. Also, supply CAGR is estimated to be at ~6% over the same period, which will help in gradual improvement in capacity utilization rates for the industry. With recovery in utilization rates, cement prices are also likely to improve in the coming period.
Management’s commentary from the recent earnings calls also indicates that price hikes across all the regions have sustained post Mar-25 and expected to remain firm in the coming period.
We remain positive on UltraTech Cement (with a target price of 15000), Dalmia Bharat (target price of 2650) and Sagar Cement (target price of 305).

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