Cement companies in India have been under tremendous pressure primarily caused by the West Asia conflict and seasonality woes, global brokerage Morgan Stanley pointed out in its note.
MS' portfolio of cement stocks have moderated by 1% over the past three months (market cap-weighted average basis), and 8% over the last 6 months. However, there have been a few pleasant surprises that lift the outlook for the sector.
Industry demand remained good during the first quarter of financial year 2027, despite disruptions from state elections, extreme summer conditions, and geopolitical uncertainty.
"Our math suggests industry demand growth of 8% YoY, vs. 7% YoY last quarter. In the near term, we expect demand growth to remain resilient and stable," MS stated in its note, while underlining that post-monsoon demand remains a key monitorable for cement companies.
The brokerage also noted that higher-than-expected cost inflation has majorly been absorbed as companies undertook multiple mitigation measures including fuel mix optimisation (aggressive shift away from petcoke/international coal in favour of domestic coal), continued shift towards lower-cost power usage, procurement efficiencies, and lead distance optimisation.
"We expect elevated costs to persist through 2QF27 in view of inventory lag effects, but we believe conflict-led cost inflation is around peak. It should gradually normalise in 2HF27, assuming no further escalation in geopolitical tensions," MS highlighted.
Lastly, the brokerage said that pricing surprised positively during the quarter and was a key takeaway from the earnings season as cement rates on an average went up 4% sequentially.
The price increase was supported by the industry's ability to pass through a significant portion of the recent cost inflation to customers.
"Management commentary and our channel checks suggest that price levels have broadly held into the monsoon period to date, indicating better-than-expected pricing discipline despite seasonal weakness," Morgan Stanley outlined, while adding that it will continue to closely watch cement pricing trends over the next few months to see if sustained demand can drive expansion in post-monsoon prices.
Who Makes MS' Concrete Cut?
Morgan Stanley prefers UltraTech Cement over its peers. The company poted a strong set of earnings for the quarter ended June 30, 2026, driven by double-digit growth in revenue and profit, healthy volume expansion and an improvement in operating performance, as demand remained robust across housing, infrastructure and commercial construction.
The Aditya Birla Group company's net profit rose 16.9% year-on-year (YoY) to Rs 2,600 crore, compared with Rs 2,225 crore in the corresponding quarter last year.
Revenue from operations increased 15.8% to Rs 24,648 crore, from Rs 21,276 crore a year earlier. At the operating level, earnings before interest, tax, depreciation and amortisation (EBITDA) grew 13.7% YoY to Rs 5,015 crore, compared with Rs 4,411 crore in the year-ago period. However, the EBITDA margin moderated to 20.3% from 20.7% a year ago.
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