HDFC Securities Flags Muted Pricing Power & Rising Costs For India’s Cement Sector

New Delhi [India]: The cement sector in India is facing challenges due to muted pricing power, and rising costs despite resilient demand, according to a research report by HDFC Securities.

The brokerage noted that the cement sector has likely witnessed pricing pressure in the March quarter and the likely to continue in the coming quarter building on extra worries in addition to the trade disruptions due to the ongoing tensions in West Asia. The brokerage further said that Despite a resilient demand outlook, the sector is expected to face headwinds in the coming quarters, with energy and packaging costs projected to rise.

"Cement demand outlook remains resilient, but pricing power continues to underwhelm despite sector consolidation," HDFC Securities said in a recent research report. The brokerage firm expects energy costs to increase by ~Rs 200-300/MT and packaging costs to rise by ~Rs 100/MT from mid-Q1FY27, exacerbated by geopolitical tensions in the Gulf regionn. The cement sector's performance in the March quarter of FY26 is has likely been a mixed bad. Demand firmed up from December 2025, with non-trade sales remaining resilient. However, pricing remained weak, with trade prices showing patchy recovery.

"Cement prices disappointed in Q4. Both trade and non-trade prices had slipped beyond GST pass-through levels in Q3FY26," HDFC Securities noted. The sector's operating margin expansion was muted, with EBITDA margins improving by only ~INR 100/MT QoQ to ~INR 970/MT. The brokerage firm attributes this to incomplete pass-through of higher input costs.

Going forward, HDFC Securities expects margin expansion of INR 120/60/95 per MT during FY26E/FY27E/FY28E, respectively. However, the firm warns that price increases are likely to trail cost inflation, making it challenging for the sector to maintain profitability. The cement sector's volume growth was robust in Q4FY26, with aggregate volumes rising by ~9% YoY. However, pricing pressures are expected to continue, with recent price hikes of INR 10-30/bag across regions being tested post mid-April.

In this challenging environment, the brokerage recommended investors to focus on companies with strong balance sheets and efficient operations. The brokerage firm has lowered its target price estimates for several cement companies, citing slower-than-expected margin improvement and organic capacity additions.

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