News

Cement stocks were on a steady run earlier this week before Thursday’s pullback, as broader markets came under pressure from rising crude prices following fresh attacks on key energy infrastructure in West Asia, rekindling supply shock fears.

Shares of UltraTech Cement, Shree Cement, Ambuja Cements, Dalmia Bharat and Nuvoco Vistas pared some of the gains made in the first three sessions. The industry had already seen a sharp correction earlier this month, when the onset of the Iran conflict spooked investors with the prospect of higher input costs.

Seasonally, the March quarter is about pushing volumes rather than cement prices, a pattern that has held this year as well. That said, the return of input cost pressures means the wait for large price hikes better not be delayed beyond April.

“Cement spreads, a key leading indicator of industry unitary Ebitda, averaged ₹2,704/tonne in Q4FY26 (forecast), marking a decline of over ₹50/tonne QoQ, as elevated costs pressured margins amid the geopolitical uncertainties,” said a 13 March report by Nomura Research.

Given that it takes 60-90 days for costs to flow through to profit and loss statements, thanks to the buffer provided by inventories and transit times, the real pressure may only show up in the coming quarters. Nomura’s channel checks, however, suggest price hikes could resume after March, once the year-end volume push subsides, helping cushion margins.

Still, near-term cost pressures are a reality, and will be hard to ignore. Imported fuel costs are up ₹72/tonne sequentially so far in Q4FY26, imported pet coke has risen another $4/tonne, and packaging costs have jumped 20-25%, adding ₹40/tonne to the cost of cement production. That’s not trivial. In fact, Nomura estimates the industry may need price hikes of roughly ₹10 per bag in the near term to offset elevated fuel costs.

For now, supply bottlenecks are not likely to be an immediate concern for pet coke because of procurement agreements, and shifted dependence towards the US in recent years away from West Asia.

Overall, fuel cost inflation is not new for cement companies. But there is a new wrinkle this time: potential shortages of polypropylene (PP), a key input for cement bags. Refineries are diverting feedstock towards LPG which has infamously been in short supply, tightening PP supply and affecting cement bag availability. With low-cost inventories running up to mid-April, supply chokes will start affecting operations only if the war extends longer.

On the demand side, trends are more encouraging. The southern and eastern markets have seen sequential and year-on-year price increases in March, suggesting these regions are better placed to absorb further hikes in FY27.

Geographically diversified cement firms like UltraTech and Ambuja, as well as those focused on southern and eastern regions, including India Cement, Orient Cement, Dalmia Bharat, and Shree Cement can be expected to lead from the front. Ramco, which already trades at a relatively expensive 15x EV/Ebitda-based on consensus Bloomberg FY27 data, remained flat.

But execution and pricing discipline will be key. If companies fail to push through hikes quickly enough, margins could compress, at least temporarily. At current levels, valuations are at a 13-23% discount to their three-year averages, with relative premiums for scale and pricing power of larger firms. Even so, the industry's overall discount leaves room for further upside, provided pricing discipline holds.

Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

Download the Mint app and read premium stories