Sagar Cements Limited — Q2 FY26 earnings call

Call held 24 Oct 2025

Management summary

Sagar Cements delivered strong Q2 FY26 results with revenue growing 27% YoY to ₹602 crore and EBITDA surging 155% to ₹51 crore, driven by 17% volume growth. Despite reporting a loss after tax of ₹44 crore and a lower EBITDA per tonne of ₹377 due to seasonal factors and one-off adjustments, the company is actively pursuing capacity expansions and efficiency initiatives, including the recent commissioning of a new preheater at Dachepalli. Management anticipates demand strengthening in H2 FY26 and expects to achieve ₹600 EBITDA per tonne for the full year.

Highlights

  • Revenue of ₹602 crore, up 27% YoY from ₹475 crore in Q2 FY25.

  • EBITDA increased to ₹51 crore in Q2 FY26, up 155% YoY from ₹20 crore in Q2 FY25.

  • EBITDA margins improved to 9% in Q2 FY26 from 4% a year ago.

  • Volume growth of 17% YoY was recorded in Q2 FY26 despite seasonal demand softness.

  • New 6-stage preheater at Dachepalli plant successfully commissioned on October 23, 2025.

Concerns

  • Loss after tax of ₹44 crore reported in Q2 FY26.

  • EBITDA per tonne declined to ₹377 in Q2, impacted by lower realization and inventory adjustments.

  • Delay in land sale due to typographical errors, pushing approval to the current financial year.

Key financials

  1. Revenue ₹602 Cr +26.7%YoY
  2. EBITDA ₹51 Cr +155%YoY
  3. EBITDA Margin 9%
  4. EBITDA per tonne ₹377
  5. Loss after tax ₹44 Cr
  6. Power and fuel cost per tonne ₹1,428
  7. Freight cost per tonne ₹855

What they filed

Q1 FY27: revenue up 5.2%, net profit down 500.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue475 564 658 671 602 +27%591 +5%787 +20%706 +5%
EBITDA20 38 37 121 51 +155%38 +0%82 +122%72 −40%
Net profit-57 -54 -73 7 -44 +23%-64 −19%100 +237%-28 −500%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex ₹450 Cr Raised — able to push some implementation slightly ahead of time
    • Capacity expansion at Andhra Cement and Jeerabad
    • New 6-stage preheater at Dachepalli plant
    • 4.35-megawatt waste heat recovery project at Gudipadu ₹78.3 Cr

    Previously planned ₹360 Cr

    Yeah, the Capex, what we have indicated was around ₹360 crore for the current year, sir. It has slightly gone up not because of anything, but we are able to push some implementation slightly ahead of time. So, this ₹360 crore probably should end up at around ₹450-odd crore for the current year. So out of that, we did ₹180 crore. Yeah, we should end up spending another ₹250-odd crore for the current year, sir. Waste heat recovery CapEx is usually anywhere between ₹18 crore to ₹20 crore per megawatt, sir. We are very much well within that limit.
  • Debt Gross ₹1,610 Cr · 0.7× EBITDA
    gross debt as on 30th September 2025 stood at ₹1,610 crores, out of which ₹1,216 crores is a long-term debt, the remaining constitutes the working capital. The net worth of the company on a consolidated basis as on 30th September 2025 stood at ₹1,758 crores. Debt equity ratio stands at 0.69:1. Our gross debt position would remain very similar for the current year from the last year.
  • Liquidity Cash ₹175 Cr
    Cash and bank balances were at ₹175 crores as on 30th September 2025.

Guidance & targets

Volume

  • Overall sales volume Volume · FY26 · High confidence 6 million tonnes
    For FY '26, we expect overall sales volume to be around 6 million tonnes.

    — Sreekanth Reddy

  • Overall sales volume Volume · FY27 · Medium confidence upward revision

    Previously around 7 million tonnes → upward revision

    The next year guidance, probably we would like to revise upward. As we come closer probably, there might be some upward revision for the next year.

    — Sreekanth Reddy

Profitability

  • EBITDA per tonne Profitability · FY26 · High confidence ₹600
    For the current year, we believe it will be ₹600 EBITDA per tonne.

    — Sreekanth Reddy

Incentive

  • Minimum incentive received Incentive · next year · High confidence ₹25-26 crore
    See, I think around ₹25 crore to ₹26 crore as a minimum is issued.

    — Sreekanth Reddy

  • Power incentive Incentive · next year · High confidence ₹3-5 crore
    That is likely to be anywhere between 3 crore to ₹5 crore as indicated.

    — Sreekanth Reddy

Capacity

  • Jeerabad capacity expansion commissioning Capacity · end of FY26 · High confidence commissioned
    expansion of Jeerabad capacity from 1 million tonnes to 1.5 million tonnes is expected to be commissioned by the end of FY '26.

    — Sreekanth Reddy

  • Cement capacity commissioning Capacity · end of Q1 FY27 · High confidence commissioned
    Further, we expect to commission the cement capacity by end of Q1 FY '27.

    — Sreekanth Reddy

Land Sale

  • Approval process and conclusion Land Sale · current financial year · Medium confidence concluded
    we do expect the approval process and everything to be concluded in the current financial year.

    — Sreekanth Reddy

Cost

  • Employee cost run rate Cost · per quarter from Q3 onwards · High confidence ₹36.5 crore
    So, the absolute number will remain like Q2 number. Yeah, it should be in the range of around ₹36.5 kind of crore per quarter, sir.

    — Sreekanth Reddy

Demand Growth

  • Andhra and Telangana demand growth Demand Growth · next year · High confidence 15% plus
    Next year, we do expect around 15% plus kind of a year-on-year growth for Andhra and Telangana.

    — Sreekanth Reddy

  • Tamil Nadu demand growth Demand Growth · next year · High confidence 5% to 10%
    We expect 5% to 10% in Tamil Nadu

    — Sreekanth Reddy

  • Karnataka demand growth Demand Growth · next year · High confidence 3% to 5%
    and 3% to 5% in Karnataka, which has always been very, very stable.

    — Sreekanth Reddy

Andhra Cement Plant

  • Breakeven utilization Andhra Cement Plant · going forward · High confidence 50%
    Going forward, we believe that at 50%, it should break even.

    — Sreekanth Reddy

  • Optimal utilization Andhra Cement Plant · next year · High confidence 60%
    See, for the next year, we expect it to reach to the optimal kind of utilisation, which is close to around 60%.

    — Sreekanth Reddy

  • Optimal EBITDA per tonne Andhra Cement Plant · next year · High confidence ₹500-600
    We should generate close to around ₹500 to ₹600 EBITDA per tonne like the average Sagar.

    — Sreekanth Reddy

What to watch in Q3 FY26

FY27 Volume Guidance Revision

next quarter
Current around 7 million tonnes
Target upward revision

Why it matters

Signals stronger demand outlook and potential for higher sales volumes, impacting future revenue growth.

The next year guidance, probably we would like to revise upward. As we come closer probably, there might be some upward revision for the next year.

Risks & concerns

  • Seasonal demand slowdown

    medium

    Overall demand during Q2 was subdued, reflecting typical monsoon seasonality.

    Management acknowledged

  • Pricing environment softening

    medium

    Pricing remained broadly stable with marginal softening in line with seasonal trends, without a significant structural increase.

    Management acknowledged

  • Competitive pressure from new capacity in South

    medium

    While currently muted, new capacity additions from players like UltraTech and Ramco could potentially create pressure in the market in the future.

    Analyst acknowledged

  • Delay in land sale

    low

    Typographical errors in paperwork have caused a 3-6 month delay in the approval process for the land sale.

    Management acknowledged

Q&A highlights

7 direct
FY27 Volume Guidance Direct
The next year guidance, probably we would like to revise upward. As we come closer probably, there might be some upward revision for the next year.

Management signals potential for higher volume growth in FY27 than previously guided, indicating a positive demand outlook.

Asked by Shravan Shah

Q2 EBITDA per tonne decline Direct
One is an incentive because there was large incentive that was received during Q1... The biggest delta in this is a small drop in the realisation... Coupled with that, the inventory got adjusted because during the last quarter, we had to shut Andhra plant completely, the clinker.

Management clarifies the reasons for the Q2 EBITDA per tonne decline, attributing it to one-off incentives, seasonal realization drops, and plant shutdowns for maintenance.

Asked by Guru Darshan

Land Sale Update Partial
we almost got the clearance, but they then observed a few typographical errors... So, it had to go back again... we do expect the approval process and everything to be concluded in the current financial year. Probably there could be a three to six months delay in the overall sale process.

Indicates a delay in the anticipated land sale due to administrative issues, but also suggests potential for a better realization due to local development.

Asked by Shravan Shah

Pricing Outlook post GST cut Direct
Prices may remain flat for the Q3 and start picking up at least from early part of Q4, might sustain till end of February to early part of March and probably small correction for year-end kind of a push.

Provides a near-term pricing outlook, suggesting stability in Q3 before a potential improvement in Q4, which is crucial for profitability.

Asked by Shravan Shah

Impact of South capacity additions Direct
the capacity announcements in South... some of the capacities just got added up, and they are in a ramp-up phase now. So, till this happens, we don't expect any new capacities that come up, except for one large line that was announced by UltraTech... The one which is under construction... would be Ramco Line 2 in Kolimgundla.

Management indicates a relatively stable supply-demand balance in the South, with limited new capacity additions expected in the near term, which is positive for pricing.

Asked by Pinakin Parekh

Andhra Cement plant breakeven and optimal EBITDA/tonne Direct
Going forward, we believe that at 50%, it should break even... See, for the next year, we expect it to reach to the optimal kind of utilisation, which is close to around 60%. We should generate close to around ₹500 to ₹600 EBITDA per tonne like the average Sagar.

Clarifies the turnaround potential for the Andhra Cement plant post-upgrades, providing specific targets for utilization and profitability.

Asked by Vincent Andrews

Employee cost run rate Direct
annual increment of close to around 10% has been implemented. So, the run rate more or less for the quarter is what you should look for going forward. The raw material cost and everything more or less in our belief, should remain flat. So, the absolute number will remain like Q2 number. Yeah, it should be in the range of around ₹36.5 kind of crore per quarter, sir.

Management provides clarity on the new baseline for employee costs following annual increments, indicating a stable quarterly run rate from Q3 onwards.

Asked by Shravan Shah

FY26 Capex Revision Direct
the Capex, what we have indicated was around ₹360 crore for the current year, sir. It has slightly gone up... So, this ₹360 crore probably should end up at around ₹450-odd crore for the current year.

Management confirms an upward revision in the current financial year's capex plan, indicating increased investment in growth and efficiency.

Asked by Shravan Shah

3 min read 6 chapters

Detailed narrative

Strong Q2 FY26 Performance Driven by Volume Growth

Sagar Cements reported a robust Q2 FY26, with revenue increasing 27% year-on-year to ₹602 crore, up from ₹475 crore in Q2 FY25. This growth was primarily fueled by a 17% year-on-year increase in sales volumes, despite the typical subdued demand during the monsoon season. EBITDA for the quarter saw a significant jump to ₹51 crore, compared to ₹20 crore in the prior year period, resulting in an improvement in EBITDA margins from 4% to 9%.

Profitability Impacted by Seasonal Factors and Adjustments

Despite the strong top-line growth, the company recorded a loss after tax of ₹44 crore in Q2 FY26. EBITDA per tonne stood at ₹377, a decline from the normalized Q1 figure of approximately ₹600 per tonne. This was attributed to a large incentive received in Q1, a 3-4% drop in realization due to seasonal trends, and inventory adjustments necessitated by plant shutdowns at Andhra and Mattampally for maintenance and upgrades. Power and fuel costs per tonne slightly decreased to ₹1,428 from ₹1,446 in Q2 FY25, while freight costs increased to ₹855 from ₹830 per tonne.

Capacity Expansion and Operational Efficiency Initiatives

Sagar Cements is actively pursuing its capacity expansion and efficiency enhancement plans. The new 6-stage preheater at the Dachepalli plant was successfully commissioned on October 23, 2025. Capacity expansion projects at Andhra Cement and Jeerabad are progressing as planned, with the Jeerabad capacity expected to increase from 1 million tonnes to 1.5 million tonnes by the end of FY26. The company also highlighted the 4.35-megawatt waste heat recovery project at Gudipadu unit, which is part of its cost optimization efforts.

Positive Market Outlook and Demand Projections

Management anticipates a strengthening of demand conditions in the second half of FY26, driven by pent-up consumption and increased government spending. For FY27, the company projects robust demand growth, with Andhra Pradesh and Telangana expected to grow over 15%, Tamil Nadu 5-10%, and Karnataka 3-5%. The pricing environment is expected to remain flat in Q3 before a potential pickup in Q4, with the company maintaining its full-year FY26 EBITDA per tonne guidance of ₹600.

Capital Structure and Land Sale Update

As of September 30, 2025, Sagar Cements reported gross debt of ₹1,610 crore, with long-term debt accounting for ₹1,216 crore, and a debt-to-equity ratio of 0.69:1. Cash and bank balances stood at ₹175 crore. The company's FY26 capex plan has been revised upwards from ₹360 crore to approximately ₹450 crore, with an additional ₹250-275 crore planned for FY27, including maintenance capex. The previously announced land sale has been delayed due to typographical errors but is still expected to conclude within the current financial year, potentially yielding a better realization.

Incentives and Employee Cost Management

The company received ₹11 crore in incentives during Q2, bringing the total for FY26 to ₹45 crore. For the next financial year, a minimum of ₹25-26 crore in incentives is expected, supplemented by an additional ₹3-5 crore from power incentives. Following a 10% annual increment, employee costs are projected to stabilize at a quarterly run rate of approximately ₹36.5 crore from Q3 onwards. Management emphasized ongoing cost optimization initiatives, including freight efficiency, clinker factor reduction, and increasing the share of renewable energy in its power mix.

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