Global brokerage firm CLSA said it continues to prefer UltraTech Cement and Shree Cement among large-cap cement stocks, while Dalmia Bharat also remains an attractive opportunity. In a note on the cement sector, the brokerage said its channel checks indicate that demand remains resilient despite the seasonally weak period.
Below-normal rainfall has also supported cement pricing, it said. Cement companies' Q1 earnings broadly surprised on the upside, driven by stronger-than-expected volume growth and better cost performance. This helped support consensus earnings estimates despite continued cost pressures.
However, profitability is likely to come under pressure in Q2FY27, amid higher fuel costs, weaker volumes and negative operating leverage. CLSA expects easing competitive intensity and relatively benign fuel costs to support a recovery in the second half of FY27.
Separately, brokerage firm JM Financial said capacity expansion deferments by larger industry players, excluding UltraTech, remain constructive for the sector as companies shift their focus towards improving utilisation and returns on existing assets.
However, elevated fuel costs and weaker operating leverage are likely to keep industry margins under pressure in Q2FY27, JM Financial said. The brokerage expects profitability to improve meaningfully in H2FY27, supported by a likely recovery in cement prices, moderation in input costs and stronger operating leverage.