Global investment banking and key brokerage house HSBC believes the Indian cement sector is ready to bounce back in early 2026 following a long period of weak prices and poor market returns. HSBC expects these price hikes between January – March noting that “the consolidation of market share among the top five players provides a structural shield that was absent in previous cycles.”
Cost pressures and regional gains
The HSBC report noted that the industry is facinghigher costs, specifically a 4% increase in imported pet coke and a 9% rise in domestic pet coke, coupled with a weaker Indian Rupee. However, according to the brokerage house, a 5-6% growth in demand will provide enough volume to help offset these expenses through operational leverage.
Geographically, HSBC identified the East and South as areas with the highest potential for recovery. Because prices in these regions dropped the most in 2025, they now provide the most room for margin growth as the industry implements new price hikes in Q1CY26.
HSBC highlighted that “investor sentiment has bottomed out in the South, and we see the widest gap between current valuations and replacement costs in this geography.”
Here is a quick look at HSBC’s top cement picks at the moment –
#1: HSBC on UltraTech Cement: ‘Buy’
The target price for UltraTech Cement is set at Rs 14,900, which represents a potential upside of 25.2%. HSBC identified the company as its top choice because of its massive scale and operational efficiency, which competitors find hard to match.
The investment bank expects UltraTech to keep growing its market share through its own expansion and by successfully integrating its new acquisitions. The firm values the company at 21.0x EV/EBITDA, observing that “UltraTech’s pivot toward green energy and waste heat recovery systems is not just an ESG goal but a core driver of its cost-leadership strategy.”
#2: HSBC on Ambuja Cements: ‘Buy’
The target price for Ambuja Cements is Rs 720, offering a potential upside of 27.3%. HSBC described this as a strong two-year investment because the company is growing its capacity quickly while cutting costs.
The report stated that the plan to merge with ACC and Orient Cement is a major structural benefit.
HSBC noted that, “The simplified corporate structure removes the ‘complexity discount’ that has historically weighed on the stock, allowing the market to focus on the management’s aggressive cost-saving roadmap.” Additionally, they expect new clinker kilns to provide a material cost advantage.
#3: HSBC on Dalmia Bharat: ‘Buy’
The target price for Dalmia Bharat is Rs 2,740, with a potential upside of 27.6%. HSBC finds that Dalmia is the company most likely to profit from price recoveries in the East and South, where market prices have been the lowest.
The analysts expressed optimism towards the company for meeting its expansion goals while keeping a healthy balance sheet. HSBC writes, “Dalmia remains a high-conviction play on regional price mean-reversion, backed by a management team with a proven track record of disciplined capital allocation.”
The hold category: HSBC cautious on 2 cement firms
HSBC, however, has a cautious view on a few cement names, though. It has maintained a Hold rating on Shree Cements because the valuations are seen as expensive and worry about its heavy reliance on the highly competitive Northern India market. “We maintain our Hold rating as we believe the stock’s current expensive valuations (17.3x FY27e EV/EBITDA) will limit further upside from here. Moreover, we expect the North to lead the industry’s next capacity addition cycle, where SRCM’s exposure is the highest.”
The firm also maintained a Hold rating on ACC, noting that the company has “less individual importance following its merger activities” and is dealing with shutdowns at its clinker plants.
The consolidation shield against new capacity
HSBC addressed concerns around the c100MT capacity addition over FY26–27, noting that “a large part of the capacity addition will only ramp up from 2HFY27,” and that the actual impact is “likely to be back-ended in CY26,” which should allow cement price hikes to flow through in 1H26.
While the firm expects 3QFY26 to be weak, citing “q-o-q price declines of 1–3%” that are likely to result in “flat to lower EBITDA/t q-o-q,” it sees this phase as transitory.
HSBC believes that price hikes during the seasonally strong January–March period should help reverse the sector’s underperformance, aided by the fact that “increased industry consolidation should allow for cement price hikes to flow through,” as recent acquisitions have concentrated capacity among fewer, larger players.
HSBC report states, “The industry’s ability to maintain pricing discipline is at an all-time high, as regional leaders now prioritize value over volume in a bid to restore EBITDA margins.”
Conclusion
The core finding from HSBC is a tactical move toward specific stocks that are positioned to benefit from the price recovery expected in the first quarter of 2026. While the upcoming quarterly earnings may appear disappointing, the firm views this as the bottom of the cycle. “We believe the risk-reward ratio is now skewed to the upside for sector leaders as demand enters the infrastructure-heavy window,” HSBC concluded.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.