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Cement Sector: Higher costs offset better realisations in Q1FY27; recovery expected from H2FY27

ICICIdirect Research 24 Jul 2026 DISCLAIMER

In Cement sector, UltraTech Cement, JK Cement and Nuvoco Vistas have reported its Q1FY27 results so far. Overall operational performance of these companies was little better than expectations.
Overall cement demand growth remained healthy at 7-8% during the quarter, supported by housing & infra construction activities. UltraTech and JK Cement reported strong double-digit volume growth of ~12% YoY & ~16% YoY respectively, as both the companies are benefiting from meaningful capacity additions done in the recent past. Over the last one year, Ultratech added ~13 mtpa of organic capacity along with ramping-up of India Cements 14.5 mtpa capacity. JK Cement also added ~7 mtpa of new capacity in the last one year. Nuvoco’s volume growth was moderate at ~4% YoY as there was no new capacity been added during FY24-26 and capacity utilization stands at ~85%
Average blended realization has improved by ~4% in Q1FY27 on sequential basis led by price hikes taken during the quarter. UltraTech’s realization was higher by ~3% QoQ while JK Cement and Nuvoco reported ~7% QoQ improvement in blended realization
However, profitability of these companies was impacted due to higher fuel cost, raw material cost, packing cost. Ultratech’s EBITDA/ton stood at Rs 1214/ton (+1.4% YoY, -3% QoQ) while JK Cement’s EBITDA/ton stood at Rs 980/ton (-20% YoY, -2% QoQ) and Nuvoco’s EBITDA/ton stood at Rs 1072/ton (+5% YoY, +9.5% QoQ)
Going forward, we expect some margin pressure in Q2FY27 also due to higher fuel & packaging cost. Management commentaries also indicate near-term cost increase of Rs 140-150/ton QoQ in Q2FY27
However, we believe that overall operational performance of these companies would recover from H2FY27E onwards as demand outlook remains steady along with firm pricing scenario. Moreover, focus on operational efficiencies (like usage of green power, change in fuel mix, logistics cost optimization) would help companies in overall cost savings.
On the volume growth guidance for FY27E, management of UltraTech & JK Cement have maintained double-digit volume growth guidance, led by timely capacity additions. UltraTech is expanding its capacity to 242 mtpa by FY28E (from ~200 mtpa at present) while JK Cement is expanding its capacity to 43 mtpa by FY28E (from 35.4 mtpa at present). Nuvoco has guided volume growth of 7-8% for FY27E (in-line with industry) and it is expanding its capacity to 35 mtpa by FY28E (from 27 mtpa at present)
For UltraTech, we estimate volume CAGR of ~11% over FY26-28E with EBITDA/ton to improve to Rs 1308/ton by FY28E (from Rs 1103/ton in FY26). For JK Cement, we estimate volume CAGR of ~12% over FY26-28E with EBITDA/ton to improve to Rs 1186/ton by FY28E (from Rs 1013/ton in FY26). For Nuvoco, we estimate ~10% CAGR over FY26-28E with EBITDA/ton to improve to Rs 994/ton by FY28E (from Rs 910/ton in FY26)
We have maintained BUY on these companies. UltraTech Cement (TP – 13880), JK Cement (TP – 6550), Nuvoco Vistas (TP – 465)

View our research recommendation on J K Cements Ltd Also explore more on Research page

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