Cement Sector To Add Strength? Goldman Sachs Predicts Resilient Q2 Earnings

The cement sector could prove to be resilient in the upcoming earnings season, according to Goldman Sachs.

Goldman Sachs has a 'buy' rating on UltraTech Cement Ltd., 'neutral' rating on Shree Cements Ltd., Dalmia Cement Ltd. and JSW Cement Ltd.

Price sustainability in July or August, despite weaker than expected volumes in a seasonally weak quarter, has driven stable operational numbers for Indian cement companies.

The brokerage further noted the volumes were already weak in July and August, growing mid-single digits. The first half of September has seen weakness, but the last week should see growth driven by post-GST cut pent-up demand.

Costs have been generally stable – although pet-coke prices have spiked recently, compounded by the depreciating rupee, it added.

Goldman Sachs highlighted that cement stocks benefit at the margin due to the GST cut, despite which stocks on average have performed in line with the broader market recently due to weak demand trends and market concern that prices may not hold.

After a weak Q1, the brokerage expects Q2FY26 industry volume growth also to be soft at approximately 4% year-on-year, in a quarter where a GST cut could shift demand towards the end of September.

The three largest cement companies—UltraTech, Ambuja and Shree—are scheduled to add 41 mnt cement capacity in FY26. The brokerage expects the industry to add nearly 45-50 mnt of capacity in FY26, higher than the 31 mnt expected incremental demand in FY26.

"If demand softens, companies might decide to push out some expansions, but we note construction work on a majority of the 45-50 mnt pipeline has started, and the sub-optimal utilisation levels of the four large acquired assets by UltraTech and Ambuja, which they aim to also improve next year," it added.

Goldman Sachs noted, 'What has come as a positive surprise is that price increases taken in Q1 have corrected only marginally in Q2.' The average price correction in Q2 over the base of June 2025 has been approximately Rs 5-10 per bag or almost Rs 120 per tonne, with similar price corrections across the country.