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Cement Sector – Profitability remains strong on YoY basis, mainly led by better realisations

ICICIdirect Research 24 Oct 2025 DISCLAIMER

In cement sector, two large companies (UltraTech Cement and Dalmia Bharat) reported its results
For Ultratech Cement, consolidated revenue was up ~25% YoY to Rs 19,606.9 crore as sales volume was up by ~22% YoY to 33.8 mtpa. Strong volume growth was mainly led by consolidation of India Cements & Kesoram Industries and ramp-up of recently added capacities. H1FY26 volume growth also stood at ~15% YoY
Blended realisation also improved ~3% YoY as cement prices remained higher YoY and were largely stable QoQ despite monsoon season
EBITDA/ton stood at Rs 914/ton, which is an increase of 26% YoY, mainly due to better realisations and flattish cost structure on YoY basis. Subsequently, EBITDA was up 53% YoY to Rs 3,094.3 crore
Looking ahead, we expect the company’s volume at ~12% CAGR during FY25-28E (better-than-industry CAGR of 7-8%), led by aggressive capacity additions (company targets to reach 218 mtpa capacity by FY27E and 240 mtpa capacity by FY28E from 192 mtpa at present)
Moreover, company remains focused on cost reduction of Rs 300/ton over the next 2-3 years, through a mix of measures including logistics cost optimisation and increasing share of green power & alternative fuels. We estimate company’s EBITDA/ton to improve to Rs 1423/ton by FY28E (from Rs 924/ton in FY25 and Rs 1062/ton in H1FY26)
Overall, we estimate revenue and EBITDA CAGR of ~14% and ~29% respectively over FY25-28E. Our long-term view on UltraTech Cement remains positive considering the increasing scale of operations, diverse market-mix and lower earnings volatility. We have a Buy rating on the company with a target price of Rs 15,000
For Dalmia Bharat, revenue was up by 10.7% YoY to Rs 3417 crore, mainly led by higher realisation (+7.5% YoY) as cement prices remained firm on YoY basis. Sales volume was up ~3% YoY (-1.4% QoQ) to 6.9 mtpa, which was largely in-line with expectations as the company continues to focus on profitability over volume-led growth
EBITDA/ton increased by ~56% YoY to Rs 1009/ton, led by higher realisation and flattish cost structure. Subsequently, EBITDA was up ~60% YoY to Rs 696 crores
Going ahead, though the company remains focused on profitable growth over volume led growth, we believe that volume growth to pick-up going forward, driven by demand improvement (across south, east and north-east regions) and ramping up of newly added capacities (company added ~8 mtpa capacity over the last 2 years). We estimate ~8% volume CAGR over FY25-28E as against moderate growth over the last few quarters (volume growth of 2% YoY in FY25 and de-growth of -1.4% YoY in H1FY26)
Moreover, company remains aggressive in terms of further capacity additions and targets to reach 75 mtpa by FY28E and 110-130 mtpa by FY31E (from 49.5 mtpa at present), which gives longer-term growth visibility 
In terms of profitability, we estimate company’s EBITDA/ton to improve to Rs 1362/ton by FY28E (from Rs 819/ton in FY25 and Rs 1136/ton in H1FY26), led by continuous focus on improving cost structure through operational measures (company targets to reduce overall cost by Rs 150-200/ton over the next 2 years)
Overall, we estimate revenue and EBITDA CAGR of ~11% and ~28% over FY25-28E. Despite aggressive capex plans, company’s net debt/EBITDA is also likely to remain comfortable at below 2x. We have a Buy rating on the company with a target price of Rs 2,650
 
 

View our research recommendation on UltraTech Cement Ltd Also explore more on Research page

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