SAGCEM stock: Can Sagar Cements sustain its Q2 volume growth as pricing headwinds persist?

Sagar Cements Limited (NSE: SAGCEM), a mid-sized cement manufacturer with strong regional presence across southern and eastern India, reported a resilient operational performance in the second quarter of the financial year 2025–26. Despite a softer pricing environment and temporary production disruptions, the company delivered a 27 percent year-on-year growth in consolidated revenue from operations, driven by a 17 percent jump in sales volumes.

For the three months ended 30 September 2025, Sagar Cements posted consolidated revenue of ₹602 crore, compared to ₹475 crore in the same quarter of the previous year. Consolidated sales volumes stood at 1.36 million tonnes, up from 1.16 million tonnes in Q2 FY25. This operational momentum helped narrow the net loss to ₹44.17 crore from ₹56.98 crore a year ago, while consolidated EBITDA surged 158 percent year-on-year to ₹51.33 crore.

While EBITDA per tonne rose to ₹377 from ₹172 a year ago, it still represented a steep 56 percent decline from Q1 FY26, reflecting sequential pressure from both monsoonal demand softness and temporary kiln shutdowns. Nonetheless, the company’s Q2 earnings trajectory suggests that operating leverage is beginning to return, albeit amid fluctuating realization levels.

What were the operational highlights of Sagar Cements’ Q2 FY26 performance?

Sagar Cements’ Q2 operational update showed consistent year-on-year growth across key metrics, despite a sequential volume dip of 5 percent from Q1 FY26. The decline was attributed to planned shutdowns at the Mattampally and Dachepalli plants. The kiln at Dachepalli was shut down for commissioning of a new six-stage preheater, while the Mattampally unit underwent a maintenance shutdown in September. These outages also led to a reduction in clinker stock availability, resulting in under-absorption of fixed costs and a spike in certain operational expenses.

The company’s net realization per tonne came in at ₹4,425, marking an 8 percent year-on-year improvement but a 6 percent drop from the ₹4,698 recorded in Q1 FY26. Freight costs increased to ₹855 per tonne, while raw material and fuel costs remained stable, supported by lower prices of pet coke and imported coal. Power and fuel costs per tonne stood at ₹1,428, marginally lower than the ₹1,446 in Q2 FY25.

Sagar Cements recorded a trade sales share of 51 percent, consistent with the prior year, while blended cements accounted for 50 percent of the product mix. Notably, bulk volumes increased 14 percent year-on-year, and trade volumes rose 17 percent over Q2 FY25. Packed sales remained dominant at 68 percent of total volumes, demonstrating resilience in retail and urban demand segments.

What is Sagar Cements’ management outlook for H2 FY26 and how will demand, capacity and margins evolve?

In his post-results commentary, Joint Managing Director Sreekanth Reddy expressed optimism about demand recovery in the second half of FY26. He noted that, with the monsoon season now behind, infrastructure activity, housing construction, and other cement-consuming sectors are expected to regain momentum. The company is targeting full-year sales volumes of approximately 6 million tonnes, which implies a strong volume performance in H2.

Sreekanth Reddy emphasized that operational efficiencies and cost optimization initiatives helped support margins in Q2, even in a subdued pricing environment. He pointed to disciplined cost control across the value chain and higher plant utilization as drivers of margin resilience. He also reaffirmed that all ongoing expansion projects are progressing as scheduled, positioning the company for enhanced scale and regional diversification in the coming quarters.

Where does Sagar Cements stand on capex and energy transition goals?

Sagar Cements is actively executing its capacity expansion roadmap, with significant capital expenditure milestones already achieved in the first half of FY26. The six-stage preheater at the Dachepalli unit was successfully commissioned on 23 October 2025, increasing clinker capacity to 2.31 million tonnes per annum. The company expects to commission the expanded cement capacity of 3 million tonnes at the same location by the end of Q1 FY27.

The Jeerabad capacity expansion from 1 million tonnes to 1.5 million tonnes is expected to be completed by the end of FY26. Separately, a 4.35 megawatt Waste Heat Recovery System at the Gudipadu unit is scheduled for commissioning by March 2026. The total budget for the Dachepalli expansion project is ₹470 crore, of which ₹225 crore has already been spent. For Jeerabad, the projected capex is ₹120 crore, to be funded through a ₹74 crore debt facility and internal accruals.

Green energy investments also continue to be a strategic priority. A new 6 MW solar installation was completed at the Dachepalli unit in September 2025. Across its plant network, the company is aiming for a 50 percent share of renewable power in its total energy mix by 2030. In Q2 FY26, green power accounted for 15.5 percent of energy consumption, with WHR, solar, and hydro contributing across multiple facilities.

How is Sagar Cements managing debt, liquidity and financial risk while funding its ongoing capex expansion in FY26?

As of 30 September 2025, Sagar Cements’ consolidated gross debt stood at ₹1,609.5 crore, up from ₹1,555.9 crore at the end of June. The net debt position increased to ₹1,434.7 crore, while cash and bank balances stood at ₹174.8 crore. The debt-to-equity ratio rose slightly to 0.92x from 0.86x in Q1 FY26. While overall gearing remains manageable, investors will be monitoring how quickly the company can ramp up post-capex cash flows.

The company generated ₹84.7 crore in cash from operations in H1 FY26, though this was partially offset by ₹180.4 crore in capital expenditure. Interest service coverage for Q2 FY26 declined to 1.25x from 2.32x in Q1, reflecting both lower operating income and higher interest outgo. Debt service cover also slipped to 0.68x, underscoring the need for a robust earnings rebound in the second half to support financial flexibility.

What does Sagar Cements’ Q2 FY26 shareholding pattern and stock market positioning indicate for investors?

As of 30 September 2025, promoters held a 48.33 percent stake in Sagar Cements, while institutional investors accounted for 20.24 percent. Non-institutional investors comprised the remaining 31.43 percent. Key institutional shareholders include AvH Resources India Private Limited, a wholly owned subsidiary of Belgium-based Ackermans & van Haaren NV, with a 19.64 percent stake, and Premji Invest’s PI Opportunities Fund – I Scheme II, which holds 10.1 percent.

The company’s total market capitalization stood at approximately ₹3,143 crore as of October 23, 2025. The stock closed at ₹240.50 on the National Stock Exchange, down 0.96 percent for the day. This marks a correction of roughly 20 percent from its 52-week high of ₹299 touched on 5 September 2025. The 52-week low of ₹168 was recorded on 17 March 2025.

What is the investor sentiment and risk-reward outlook for Sagar Cements heading into the second half of FY26?

While Sagar Cements’ Q2 FY26 results highlighted a promising return to volume-led growth, near-term investor sentiment may remain cautious due to profit volatility, rising debt, and pricing pressure. That said, with its capacity expansions nearing commissioning, cost structures stabilizing, and green energy investments gaining traction, the company is positioning itself for stronger performance over the medium term.

If volume growth holds and realization levels recover modestly in the post-monsoon season, Sagar Cements could exit FY26 with operational momentum that supports both margin normalization and debt reduction. Institutional backing from long-term investors like Premji Invest and AvH Resources provides a degree of confidence in execution capabilities, although market participants will be closely watching quarterly updates for any shifts in project timelines, demand dynamics, or debt service metrics.

Key takeaways from Sagar Cements Q2 FY26 earnings and capex roadmap

• Sagar Cements Limited reported a 27% year-on-year increase in consolidated revenue to ₹602 crore for Q2 FY26, with sales volumes rising 17% to 1.36 million tonnes.
• Despite strong operational growth, the company posted a net loss of ₹44.17 crore, narrowing from ₹56.98 crore in Q2 FY25 due to better cost absorption and EBITDA gains.
• EBITDA per tonne improved to ₹377 in Q2 FY26 from ₹172 in the prior-year period, though sequentially declined from ₹851 in Q1 due to plant shutdowns and weaker realizations.
• Plant shutdowns at Dachepalli (for commissioning of a six-stage preheater) and Mattampally (maintenance) affected clinker availability and sequential profitability.
• Management reiterated full-year volume guidance of ~6 million tonnes and expects demand to pick up in H2 FY26 as infrastructure and construction activity resumes post-monsoon.
• Capex execution remains on track, with Dachepalli’s clinker capacity already ramped up to 2.31 MTPA and cement expansion to 3 MTPA targeted for Q1 FY27; Jeerabad expansion to 1.5 MTPA by FY26-end.
• Net debt rose to ₹1,434.7 crore with a consolidated debt-to-equity ratio of 0.92x; debt service cover moderated to 0.68x, reflecting near-term financial stress during expansion.
• Green energy mix reached 15.5% in Q2 FY26, with new solar installations at Dachepalli; company aims for 50% renewable energy by 2030.
• Institutional investors including AvH Resources (19.64%) and Premji Invest (10.1%) continue to back the company; stock closed at ₹240.50 on October 23, 2025.
• Sagar Cements’ strategic expansion across high-growth regions, disciplined cost management, and ESG-linked goals position it for long-term rerating despite near-term margin volatility.