Cement Stocks In Focus After Q1 Results; Costs, Margins And Post-Monsoon Demand Remain Key

Cement stocks have had a difficult run in recent months, with the West Asia conflict and seasonal weakness weighing on the sector. But the first-quarter numbers have offered some signs of stability, according to a recent note by Morgan Stanley.

The brokerage's cement portfolio has declined 1% over the past three months on a market-cap-weighted basis, while the fall over six months stands at 8%. At the same time, industry demand has held up better than expected despite election-related disruptions, extreme summer conditions and geopolitical uncertainty.

Morgan Stanley estimates cement demand grew around 8% year-on-year in Q1FY27, compared with 7% in the previous quarter. It expects demand to remain relatively steady in the near term, although the post-monsoon period will be an important indicator for the sector.

Key Takeaways From Q1

• Cement industry demand growth estimated at 8% YoY in Q1 FY27

• Cement prices increased around 4% sequentially during the quarter

• Companies absorbed much of the cost inflation through several operating measures

• Elevated costs could continue into Q2FY27 because of inventory-related effects

• Morgan Stanley expects conflict-related cost pressure to ease in the second half of FY27, assuming no further escalation

• Post-monsoon demand and pricing remain important factors for the sector

Cost Pressure Remains A Key Monitorable

Higher input costs have been one of the biggest concerns for cement manufacturers in recent months. However, companies have taken several steps to limit the impact on profitability.

Morgan Stanley pointed to greater use of domestic coal in place of petcoke and imported coal, along with a continued shift towards lower-cost power sources. Procurement efficiencies and efforts to optimise lead distances have also helped companies manage expenses.

The brokerage expects the effect of higher costs to remain visible through Q2FY27, partly because of the lag in inventory costs. However, it believes the cost inflation linked to the West Asia conflict may have reached its peak and could start easing in the second half of FY27 if geopolitical tensions do not worsen.

For cement companies, the ability to maintain margins while dealing with these costs will therefore remain important in the coming quarters.

Cement Pricing Shows Some Resilience

Pricing was another relatively positive development during the June quarter.

According to Morgan Stanley, average cement prices increased 4% sequentially during Q1FY27. The rise indicates that companies were able to pass on a significant part of the recent increase in costs to customers.

The brokerage also said its management interactions and channel checks indicated that prices had broadly held up during the monsoon period so far.

That trend will be closely watched. Cement demand typically softens during the monsoon, making the post-monsoon period particularly important for determining whether current pricing levels can hold and whether stronger demand can support further price increases.

UltraTech Cement Preferred By Morgan Stanley

Among cement stocks in India, Morgan Stanley has expressed a preference for UltraTech Cement, although the broader sector outlook remains dependent on demand, pricing and costs.

UltraTech reported a 16.9% year-on-year increase in consolidated net profit to ₹2,600 crore for the quarter ended June 30, 2026. Revenue from operations rose 15.8% to ₹24,648 crore.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) increased 13.7% year-on-year to ₹5,015 crore. The EBITDA margin, however, edged down to 20.3% from 20.7% in the corresponding quarter last year.

As of 1:24 pm on Tuesday, 11 August 2026, the UltraTech Cement share price stood at ₹11,810 on the National Stock Exchange. The stock declined by over 1.89% during intraday trading.

With Q1 demand remaining firm, the next few months will put the focus on three areas for cement companies: how input costs behave, whether current pricing levels can be maintained and how demand develops after the monsoon.

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