SYNOPSIS:
ACC and Ambuja Cements likely face Q2 FY26 sequential declines due to soft pricing, seasonal demand, and monsoon impact, though YoY growth, operational efficiencies, and GST benefits support resilient margins post-festive recovery.
According to investment brokerage firm Prabhudas Lilladher, the cement sector under its coverage is expected to report a quarter-on-quarter decline of around 15 percent in revenue, 26 percent in EBITDA, and 36 percent in PAT for Q2 FY26. On a year-on-year basis, however, the sector may see growth of approximately 13 percent, 55 percent, and 95 percent, respectively. The sequential weakness is primarily attributed to soft pricing trends and muted demand during what is typically a seasonally weak quarter.
Cement prices remained steady in July, but witnessed a correction in August due to subdued demand and widespread rainfall across the country. Prices stayed largely stable in September (after adjusting for GST changes), despite ongoing challenges such as heavy rains, labour shortages, and festive season disruptions.
Demand trends were uneven across regions, constrained by sluggish infrastructure spending and expectations of a GST reduction, although the rural and individual home builder (IHB) segments provided some cushion. Consequently, industry-wide volume growth is projected to stay in the low single digits. On the cost side, pet coke prices have edged up to around $ 120 per tonne, which could pressure operating margins in the upcoming quarters.
During Q2 FY26, the southern and eastern regions experienced the steepest price corrections, which adversely impacted profitability. As a result, cement companies within the coverage universe are expected to record a sequential decline in EBITDA of Rs. 150-240 per tonne, following a strong performance in Q1 FY26.
With the GST rationalisation process nearing completion across most regions, immediate price hikes appear unlikely, as companies may wait for a meaningful recovery in demand before taking such actions. Cement prices are expected to firm up once demand improves after the festive season, supported by the benefits of GST adjustments and a revival in real estate activity driven by overall economic momentum.
Key factors to watch include the pace of demand recovery after Diwali, trends in infrastructure execution and government expenditure, the trajectory of cement prices amid GST stabilisation, and the movement of pet coke and other raw material costs in H2 FY26.
ACC Limited
With a market cap of Rs. 34,974.4 crores, the stock was trading in the green at Rs. 1,862.45 on BSE, up by around 0.3 percent on Thursday. In Q2 FY26, the brokerage projects ACC to report revenue from operations of Rs. 4981.8 crores, reflecting an 8 percent growth YoY, despite a sharp 18.2 percent decline QoQ, mainly attributed to seasonally weak demand and monsoon impact leading to an estimated 16 percent drop in volumes.
EBITDA is expected to grow by 15.8 percent YoY to Rs. 505.4 crores, with margins improving by 69 basis points to 10.1 percent; however, EBITDA shows a significant 35 percent sequential drop due to a 2 percent decrease in realisations and lower volumes, compressing the quarterly margin by 264 basis points. Consequently, EBITDA per tonne is anticipated to decrease by roughly Rs. 154 QoQ to Rs. 523, while remaining up Rs. 53 YoY.
Profit before tax (PBT) is anticipated to decline by 18.9 percent YoY and 53.9 percent QoQ to nearly Rs. 259 crores, while adjusted PAT is estimated at Rs. 193.2 crores, down 13.9 percent YoY and 48.6 percent sequentially, highlighting the pressure from higher costs and lower realisation during the quarter.
Ambuja Cement Limited
With a market cap of Rs. 1.4 lakh crores, the stock was trading in the green at Rs. 568 on BSE, up by around 0.2 percent on Thursday. For Ambuja Cement, Prabhudas Lilladher anticipates robust YoY growth, with sales forecast at Rs. 8,383.5 crores, up 13.6 percent, though sequentially down 18.5 percent, as consolidated volumes are expected to shrink by around 16 percent QoQ amid sluggish demand and seasonal headwinds.
EBITDA is projected at Rs. 1,374.7 crores, up 41.2 percent YoY, resulting in a margin improvement to 16.4 percent, but marking a 29.9 percent decline QoQ as weak pricing across regions and the impact from Penna operations compress realisations by 3 percent sequentially.
The brokerage expects EBITDA per tonne to decrease by Rs. 176 QoQ to Rs. 889 per tonne. While PBT and adjusted PAT are forecast to grow 20 percent and 36.9 percent YoY, respectively, substantial sequential declines are seen due to the challenging operating environment.
Prabhudas Lilladher notes that, despite the near-term adversity from monsoon-led demand disruption and pricing pressure, both companies’ operational efficiencies and recent strategic initiatives are expected to support a resilient margin structure as the business environment normalises post-monsoon.
Written by Shivani Singh
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