Building materials hit a wall in Q2, recovery to lay bricks in FY26

Demand and margins set for slow rebuild, helping valuations cement stronger base

- RAM PRASAD SAHU

The performance of listed companies in the building materials sector during the July-September quarter (Q2) of 2024-25 (FY25) was weak.

Volumes remained subdued due to ongoing demand challenges while operating profit margins were pressured by declining gross margins and rising input costs.

Among the various segments, ceramic companies showed mixed results, while polyvinyl chloride (PVC) pipe makers and wood panel manufacturers reported declines in both volume and margin.

BOB Capital Markets noted that revenue growth for its building materials universe remained sluggish at just 1.3 percent year-on-year (Y-o-Y) for the seventh consecutive quarter, hindered by weak demand and prolonged monsoons.

Overall operating profit for the sector dropped nearly 21 percent Y-o-Y, driven by severe margin pressures.

Ceramic players performed relatively better, with Kajaria Ceramics and Somany Ceramics posting Y-o-Y volume growth of 5.3-8.4 percent.

Kajaria's Q2 volume growth of 8.4 percent was lower than its guided 11-12 percent, and the company is now targeting 9-10 percent growth for FY25.

Despite lower-than-guided growth, Kajaria outperformed the sector and gained market share during the quarter.