Our checks indicate that demand momentum stood flat YoY in Oct-25, mainly due to the festive period and extended monsoon. Accounting for various hurdles in Q3FY26 and the high base of H2FY25, we estimate demand growth of 4-5% YoY. Spot cement prices (pan-India) moderated by Rs3-4/bag in October. Of this, the maximum weakness was seen in South India (Rs7/bag), followed by East and Central India (Rs3-4/bag). North and Central India were largely flat vs Sep-25 exit levels. The checks highlighted low probability of improvement in cement prices in Nov/Dec-25 and pin hopes for a hike in Jan/Feb-26. Fuel costs were largely flat MoM and appear to remain in control, on the back of the correction in crude oil prices and ocean freight rates. The withdrawal of clean energy cess (Rs400/t) should benefit the industry in the ensuing quarters.
View: Sector valuations (near 5Y mean) factor in improved unit profitability demonstrated by the industry in H1FY26. Ahead, considering the average demand, the industry will require pricing robustness for estimate upgrades. In the short term, ceteris paribus, South-based cement companies, particularly, may see their unit profitability under pressure. We maintain our top picks – UTCEM, SRCM, and JKCE.