The brokerage views the recent GST rate cut (from 28% to 18%) as a ‘shot-in-the-arm' for the cement sector, potentially inducing a demand uptick. While demand in H1 FY26 is estimated to have improved just 2–4% (despite a low base – impacted by India's general elections last year), it expects strong recovery – in high single-digit – in H2 FY26E.
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ICICI Securities Report
For Q2 FY26, last year's low base (Q2 FY25 marred by high competitive intensity) shall enable robust YoY Ebitda growth (up ~50% for our coverage universe) despite meek industry demand (pegged at ~3–4% YoY), and a resultant drop in prices (down ~1.5% QoQ).
Also, the transition period under the reduced GST rate regime may keep cement prices flat for the next few months. Collectively, these could pose as downward risks to our FY26E earnings. However, in our view, this is ‘a step back to leap forward' phase.
We expect margin recovery to resume its momentum from FY27, riding on the benefits of potential demand improvement, reduced competitive intensity and efficiency enhancement measures by incumbents.
We opine limited risk to our FY27E earnings; hence, our stance on the sector remains positive.
UltraTech Cement in largecaps and JK Cement among mid-caps are our top sector picks.
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