UltraTech, JK Cement, Ambuja, Birla Corp, Star Cement: Q2 preview, stock picks

Domestic brokerage firm JM Financial anticipates a mixed performance for the Indian cement sector in the second quarter of fiscal year 2026 (Q2FY26). While near-term softness is expected sequentially due to a drop in realisation and operating de-leverage, the structural story for the industry remains intact. On a year-over-year (YoY) basis, however, the sector is poised for a significant earnings surge, driven by improved pricing and a low base from the previous year.

The brokerage estimates that the average EBITDA per tonne for cement companies under its coverage will decline by approximately Rs 193 sequentially in the September quarter. This is attributed to a fall in realisation of about 1.5 per cent and the impact of operating de-leverage. In stark contrast, a sharp YoY increase of over Rs 250 per tonne in EBITDA is expected, fueled by a 5 per cent YoY improvement in pricing. Consequently, the aggregate EBITDA of the coverage universe is projected to grow by more than 50 per cent year-over-year.

Volume Growth and Pricing Adjustments
Industry-wide cement volume is estimated to have grown by 4-5 per cent YoY during the quarter. However, major players are expected to outperform this average, with JM Financial noting that its coverage companies will likely post a strong growth of over 10 per cent YoY. This outperformance is largely credited to "acquisition-led expansion, particularly by Ambuja Cements and UltraTech Cement, which are expected to report >15 per cent YoY volume growth". JK Cement is also anticipated to deliver double-digit growth, while Shree Cement and Birla Corp may see growth around 7-8 per cent YoY. Meanwhile, Dalmia Bharat and Ramco Cements are forecasted to record more modest growth of about 3 per cent YoY.

A key event during the quarter was the reduction in the GST rate from 28 per cent to 18 per cent, effective September 22, 2025, the benefit of which has been passed on by cement companies. This led to a roughly 4 per cent quarter-on-quarter (QoQ) decline in pan-India average cement prices. However, after adjusting for the tax cut, effective prices were down only about 1.5 per cent sequentially, while still being up 4-5 per cent on a yearly basis. JM Financial expects cement prices to "remain range-bound" in the near term as companies focus on driving volume growth.

Brokerage Ratings and Target Prices
Reflecting the near-term dynamics, JM Financial has slightly lowered its aggregate EBITDA estimates for its coverage universe by about 1-2 per cent for FY26-28E. The brokerage has also updated its ratings and target prices for several cement stocks.

JM Financial's top picks in the sector are UltraTech Cement in the large-cap space and JK Cement among mid-caps. The firm has maintained a 'Buy' rating on Ambuja Cements with a target price of Rs 670, Birla Corporation with a target of Rs 1,550, JK Cement with a target of Rs 7,300, Star Cement with a target of Rs 300, and UltraTech Cement with a target price of Rs 14,000.

The target price for the newly upgraded Shree Cement is Rs 33,000 and for Dalmia Bharat is Rs 2,450. For the downgraded stocks, the target for ACC is set at Rs 1,920 and for Ramco Cements at Rs 1,000.