Summary:
Cement companies may face muted H1FY27 profitability as rising fuel and production costs pressure margins despite healthy volume growth. Cement prices could soften during the monsoon, while capacity additions may increase competition. However, easing input costs and stronger infrastructure demand could support earnings in H2FY27.
Cement firms are set to witness a muted first half of FY27 on account of higher prices of input material and seasonality, which will adversely impact their profitability despite a healthy growth in volumes. For the firms tracked, blended cement price realisations for Q1FY27 was up 5% sequentially to INR 15,700 per tonne while volumes were up 8% compared to previous quarter. However, production cost per tonne rose 11% sequentially and 5% YoY to INR 1,005 per tonne contributing to a 7% sequential and 16% annual dip in EBITDA per tonne.
Fuel And Freight Cost To Remain Key Headwinds
Power and fuel constitute 30% of the cost for the cement sector and emerged as the key input witnessing price hikes in Q1FY27. Import prices of petroleum coke and coal witnessed a surge on account of supply chain disruptions caused by turmoil in West Asia. Meanwhile, freight and forward freight charges also surged on account of higher diesel prices and increased polypropylene granules prices.
While input costs have eased from the peak, the impact of higher prices of inventory may continue to bear on the companies in Q2FY27 as firms burn through cheaper stock. UltraTech Cement expects sequential rise in production costs by INR 130-140 per tonne on account of higher fuel cost, maintenance and seasonal shutdowns. Similarly, Dalmia Bharat expects production costs to rise by INR 70-80 per tonne while Shree Cement expects cost to stabilise from Q2FY27 after peaking out in Q1FY27.
List of Cement and Construction Stocks
Cement Prices Poised To Dip On Seasonality
Cement prices typically dip during the monsoon period on account of weak construction activity. All-India average cement prices for Q1FY27 were up 3% sequentially but are expected to fall by 0-1% in Q2FY27.
Central region may witness the most severe price correction as capacity addition by new entrants and Dalmia Bharat which acquired Jaiprakash Associates, may intensify competition in the region. This may constrain the ability of firms to pass on input costs to downstream customers.
Volumes Remain Supportive Despite Margin Declines
Volumes growth was robust in Q1FY27 despite the sequential margin declines on account of higher input costs. This was aided by healthy demand from infrastructure and housing. Shree Cement witnessed volumes growth of 17% (sequential) while UltraTech Cement was up 12% sequentially. Growth in Ambuja Cements volumes dropped 7% on account of plant shutdowns and lower trade sales.
JSW Cement and JK Cement, major mid-cap cement firms saw volumes growth of 15% and 18% sequentially on account of capacity expansion in North and Central India.
Capacity Expansion To Moderate Prices
The sector is set to witness capacity addition of 35 mtpa in FY26 and another 40-45 mtpa in FY27. UltraTech Cement plans to add 15.9 mtpa capacity in FY27 and 29.8 mtpa in FY28 to raise grey cement capacity to 237 mtpa by FY28 end. Similarly, Ambuja Cements aims to scale up capacity to 119 mtpa by FY27 end from 100 mtpa at FY26 end while Dalmia Bharat targets to increase capacity to 66.7 mtpa by Q3FY28 from 54.7 mtpa currently.
Cement Stock Price Outlook
Stocks of cement companies have been adversely impacted by higher input costs. Shree Cement shares have fallen 6.7% in 2026 while UltraTech Cement shares have dipped 1.4% in 2026. Weakness in shares of cement firms has been broadly on account of fears of demand destruction and lower profit margins on account of higher fuel costs.
With normalisation in supply chains and geopolitical tensions, sequential moderation in input costs may be witnessed in the second half of FY27. Weak farm prices and lower than average monsoon may constrain rural demand for housing while the improved monsoon along with higher government spending on highway and railways may give a fillip to demand. Hence, the second half of FY27 may emerge as a crucial period for earnings and stock price discovery of cement firms.
