Looking for earnings surprisers? Why cement sector is the place to look

On earnings, Singh believes growth can outpace demand. “Otherwise, there is no real case,” he said. In a market where overall FY26 earnings growth of 10–12% is “at best” and under threat from headwinds in IT, cement’s mix of steady demand, pricing stability and relative value is appealing.

Cement stocks could be among the few candidates for earnings upgrades in a market where valuations in many sectors are already at decade highs, according to Rahul Singh, CIO of Tata Mutual Fund. “After two years of kind of iffy, up-and-down performance, there is no belief in EBITDA per tonne going up,” Singh told N. Mahalakshmi on The Wealth Formula podcast. “There has been consolidation, but the two large guys are also wanting to take market share. If you look at the commentary in the last one quarter from some of the large (companies), not part of these two groups, there seems to be an understanding that the pricing has to be held and the profitability has to be improved. Nobody is going to fight for market share beyond a certain sensible competition. So I think that’s the starting point for earning upgrades to start.”

Singh said companies may get “a little help from lower commodity prices,” but called that a bonus. While “nothing is super cheap today,” valuations in cement, relative to their own history, offer a case for upside if earnings upgrades materialise.

On triggers, Singh noted that demand growth is likely to remain in the 6–8% range, driven largely by government-led capex rather than real estate. “It’s not going up like a rocket, the way the real estate demand and infrastructure demand was there last two, three years,” he said. Historically, cement was seen as “the safest proxy” to infrastructure when the capex cycle was weak and infrastructure growth was actually weak, but “somewhere it got left behind” when infrastructure boomed from 2022 to 2024.

Watch the full episode here: Forget Trump Tariffs, Rate Cuts. Find Stocks with Earnings Explosions and Re-rating Stories

While high double-digit demand growth is unlikely, Singh argued that moderate growth is healthier for the sector.

“In cement, a very high demand growth sometimes also feels uncomfortable… the pricing discipline in the 6–7–8% kind of growth is much more of a tenable argument as compared to a 10–12%,” he said. This is because at higher growth rates, companies tend to add capacities, altering the demand-supply equation in a manner that destroys pricing and profitability.

With other sectors trading at their 10-year peaks, Singh sees “good rerating potential” in cement, with stock-specific upsides that are “not insignificant.” The sector still has some leverage, which could amplify returns, unlike other traditionally leveraged sectors such as metals, infra and real estate, where balance sheets have turned net cash.

On earnings, Singh believes growth can outpace demand. “Otherwise, there is no real case,” he said. In a market where overall FY26 earnings growth of 10–12% is “at best” and under threat from headwinds in IT, cement’s mix of steady demand, pricing stability and relative value is appealing. “It’s not a bad place to be, frankly. In cement, the upside from EBITDA per tonne can outrun the upside from volume growth. That’s the nature of the P&L.”