Cement stocks set to rise due to these four reasons

After a weak first half in 2024-25, cement companies saw improved volumes and revenues in the March 2025 quarter. Data from Reuters-Refinitiv covering 27 cement firms (with market capitalisation of over Rs.500 crore) shows aggregate revenue rising 11% year-on-year, from 4.4% in the December 2024 quarter.

In the first half of 2024-25, the sector’s performance was affected by the general elections, extreme heatwave, and labour shortages. Muted demand also pressured prices and realisations, weakening profitability.

The concerns are evident in share price performance. Over the past year, the group of 27 companies delivered an equal-weighted average return of -4.8%, lagging the Nifty 500’s 7% gain. Sixteen stocks posted negative returns, and 19 underperformed the index. Returns are as of 10 June 2025.

March quarter tailwinds

Factors like pent-up demand, increased government spending, revival in rural demand, a low base, and selective price hikes aided the performance in the March 2025 quarter. However, despite stability in prices, the realisations for most companies declined on a year-on-year basis due to market resistance and year-end discounts.

Beyond demand triggers, lower operational expenses—especially power and fuel costs supported by stable pet coke and diesel prices—drove a sequential improvement in EBITDA margins. Margins improved for 21 of the 27 companies in the March 2025 quarter compared to the three months ended December 2024.

Mid-to-long term view

The revival of construction activities across key markets led to a sharp jump in the cement prices in April 2025. Though the increase in prices moderated in May, the current prices are the highest in the past 15-17 months. In the first two months of 2025-26, all India average prices have jumped by 7-8% year-on-year, according to data compiled from a JM Financial report.

Prices saw the sharpest sequential rise in the southern and eastern regions, while remaining largely flat elsewhere. The price hikes, along with cost efficiencies, are expected to support cement companies’ financial performance in the June 2025 quarter.

Rising cement prices bode well for the sector

Cement companies share price returns (%)

While Elara Capital and JM Financial flagged near-term concerns due to an early monsoon potentially curbing demand growth, reports from Axis Securities, Centrum Broking, PhillipCapital, Nuvama, Systematix, Prabhudas Lilladher, and ICRA remain constructive on the sector’s long-term growth prospects. The ICRA report expects cement volumes to grow by 6-7% year-on-year, backed by demand from the housing and infrastructure sectors.

Growth in residential and commercial real estate, recovery in rural spending, and increased urbanisation are the factors driving cement demand. Moreover, government investments in infrastructure and programmes such as the Smart Cities Mission, Bharatmala Pariyojana, PM GatiShakti, and Housing for All will provide additional support to the sector.

Moreover, the adoption of green technologies by cement companies (waste heat recovery, alternative fuels etc) is expected to support margins by imparting cost of efficiencies. In addition, the ongoing capacity expansion by key players will boost industry volumes. A Centrum Broking report says that the industry will see additional organic capacity additions over the next 2-3 years and that it expects the industry's capacity utilisation levels to increase from 74% to 77%. Here are the five cement companies with decent analyst coverage and with good buy ratings.

Birla Corporation

• The company reported an excellent performance in the March 2025 quarter, with revenue and net profit exceeding Reuters-Refinitiv estimates by 5% and 92% respectively.
• While the volumes jumped 17%, realisations registered 7% growth on a sequential basis. This, coupled with cost optimisation measures, aided EBITDA, which grew 115% quarter-on-quarter.
• The capex plan of Rs.4,340 crore is aimed at increasing grinding and clinker capacity, which will increase production capacity from 20 MMT (million metric tons) currently to 27.6 MMT by 2028-29.
• The funding of capex will be through internal accruals, which will restrict the expansion of net debt. The management has guided that the net debt to EBITDA ratio shall remain below 2 for the next two years.
• An Elara Capital report says that the company's limited presence in the surplus market of south India, continued incentive income, focus on premiumisation, and savings from coal mines bode well for long-term performance.

Dalmia Bharat

• Aided by lower costs and operating leverage benefits, the firm posted a decent operating performance despite muted revenue growth. While revenue missed Reuters-Refinitiv estimates by 4.7%, net profit exceeded estimates by 40%.
• Decline in volumes impacted revenue growth, whereas higher other income and lower than expected depreciation boosted net profit.
• The management is strengthening the dealer network and distribution channels as well as investing in brand building. It anticipates demand recovery in 2025-26, led by increased government spending and pent-up demand.
• The planned capex of around Rs.3,500 crore for 2025-26 is marked for expansion projects in Karnataka and Maharashtra. The company¡¦s capacity is lower than its peers and capacity expansion plans will address such concerns to some extent.
• A Motilal Oswal report says that Dalmia Bharat is among the low-cost producers in the cement industry, backed by a higher blending ratio (the proportion of different materials used to produce cement), green power share, and lower freight costs. Moreover, the recent price hikes in its core markets may help improve margins.

JK Cement

• It reported a strong performance in the March 2025 quarter, aided by volume growth and lower operating costs. Revenue and net profit surpassed Reuters-Refinitiv estimates by 9.1% and 10.3%, respectively.
• Market share gains in the central India region boosted volumes, which grew 16% year-on-year. On the other hand, reduction in pet coke prices and operating leverage gains led to cost reduction.
• The ongoing capacity expansion plans will boost production capacity from 24.3 MMT in 2024-25 to 30.3 MMT in 2025-26. The company¡¦s ability to generate strong operating cash flows will help limit the expansion of net debt.
• An Elara Capital report says that JK Cement is well-positioned for healthy volume growth, aided by a strong pipeline of ongoing capacity expansion projects. It lists steady price trend in north India, cost-saving measures, and its plans to enter the high-margin Kashmir market as the key growth catalysts.

Solid cement bets backed by analysts

UltraTech Cement

• The company met the revenue estimates compiled by Reuters-Refinitiv in the March 2025 quarter, aided by decent volume
• growth and modest realisations.
• Decline in operating costs (including raw materials, power, and fuel) and increase in green power mix supported EBITDA, which grew by 12% year-on-year.
• The management has announced a capex plan of Rs.1,500 crore, aiming for efficiency projects in India Cements and Kesoram Industries (acquired companies). Such projects are expected to aid overall profitability in the future.
• While the company¡¦s net debt swelled due to acquisitions, the ability to generate strong operating cash flows will help reduce net debt over the next two years.
• A Systematix report maintains a positive outlook on the company¡¦s long-term growth potential, driven by its strong market leadership, disciplined cost management, and ambitious capacity expansion plans. The firm's focus on deleveraging and integration of recently acquired assets are other positives.

Ambuja Cements

• It reported a strong operating performance in the March 2025 quarter, aided by volume growth and better realisation. Revenue surpassed Reuters-Refinitiv estimates by 2.5%.
• While volume growth of 13% year-on-year was aided by the ramp-up of acquired assets (Sanghi Industries and Penna Cement), cost efficiencies and sequential decline in raw materials and fuel costs supported EBITDA, which grew by 110% quarter-on-quarter.
• The management has reiterated its cost reduction guidance of Rs 500 per ton by 2027-28 by increasing the share of green power and long-term supplier agreements.
• A Prabhudas Lilladher report expects the company to keep gaining market share, aided by the ramping up of Penna/Sanghi assets. Moreover, the gradual improvement in the green power mix and targeted synergy benefits will support EBITDA growth over the next few years.