The quarter witnessed a sequential revenue decline of 14.43% from ₹2,542.36 crores in Q1 FY26, pointing to execution headwinds and project timing issues. However, on a year-on-year basis, revenue grew a respectable 9.27%, demonstrating underlying demand strength in the infrastructure sector. The company's ability to expand operating margins despite revenue pressure suggests improved project mix and cost management discipline.
ITD Cementation's performance in the first half of FY26 presents a study in contrasts—strong profitability growth overshadowed by sequential execution challenges. The stock has delivered exceptional long-term returns, up 567.44% over three years and 902.15% over five years, significantly outperforming the Sensex. However, recent volatility has seen the stock decline 21.63% over three months and trade 28.28% below its 52-week high of ₹943.20.
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | Operating Margin | PAT Margin |
|---|---|---|---|---|---|---|
| Sep'25 | 2,175.45 | -14.43% | 107.66 | -21.54% | 9.35% | 4.95% |
| Jun'25 | 2,542.36 | +2.53% | 137.22 | +20.85% | 9.16% | 5.40% |
| Mar'25 | 2,479.72 | +10.46% | 113.55 | +30.49% | 10.46% | 4.59% |
| Dec'24 | 2,244.86 | +12.76% | 87.02 | +20.79% | 9.18% | 3.88% |
| Sep'24 | 1,990.87 | -16.40% | 72.04 | -28.10% | 9.12% | 3.63% |
| Jun'24 | 2,381.49 | +5.48% | 100.19 | +11.93% | 9.30% | 4.21% |
| Mar'24 | 2,257.72 | — | 89.51 | — | 9.77% | 3.97% |
Financial Performance: Profitability Shines Amid Revenue Volatility
ITD Cementation's Q2 FY26 financial performance reveals a company navigating project execution cycles whilst maintaining profitability discipline. Net sales of ₹2,175.45 crores in Q2 FY26 marked a 14.43% sequential decline from the previous quarter's ₹2,542.36 crores, though the 9.27% year-on-year growth demonstrates sustained demand in the infrastructure sector. For the first half of FY26, the company generated revenues of ₹4,717.81 crores, representing a robust 14.96% increase over H1 FY25's ₹4,103.95 crores.
Operating profit excluding other income stood at ₹203.32 crores in Q2 FY26, translating to an operating margin of 9.35%—a 19 basis point improvement quarter-on-quarter and 23 basis points year-on-year. This margin expansion, achieved despite revenue contraction, reflects improved project economics and operational efficiency. The company's gross profit margin of 8.69% in Q2 FY26 showed healthy improvement from 7.38% in the corresponding quarter last year, indicating better pricing power and cost management.
The standout metric was net profit, which surged 49.44% year-on-year to ₹107.66 crores, despite declining 21.54% sequentially from Q1 FY26's exceptional ₹137.22 crores. The PAT margin of 4.95% in Q2 FY26 represented a significant 132 basis point expansion from 3.63% in Q2 FY25, driven by operational leverage and controlled interest costs. For H1 FY26, consolidated net profit reached ₹244.88 crores, up 42.12% from ₹172.23 crores in H1 FY25, demonstrating strong earnings momentum.
Interest expenses of ₹52.71 crores in Q2 FY26 showed a favourable 7.87% year-on-year decline, reflecting improved debt management and lower borrowing costs. Depreciation stood at ₹43.14 crores, down from ₹46.85 crores in Q2 FY25. The tax rate of 26.44% in Q2 FY26, whilst higher than the previous quarter's 16.08%, remained within historical norms and below the peak of 31.31% seen in Q4 FY24.
Balance Sheet Quality: Strong Capital Efficiency with Controlled Leverage
ITD Cementation's balance sheet as of March 2025 reflects a company with improving financial health and robust capital efficiency. Shareholder funds stood at ₹1,833.39 crores, up 22.74% from ₹1,493.70 crores in the previous year, driven by retained earnings and strong profitability. The company's book value per share reached ₹106.72, providing a solid foundation for the current market valuation.
The company maintains a conservative debt profile with long-term debt of ₹118.29 crores as of March 2025, down from ₹133.18 crores the previous year. The debt-to-equity ratio of 0.11 positions ITD Cementation among the least leveraged players in the construction sector, providing significant financial flexibility for growth investments. The debt-to-EBITDA ratio of 1.29 times reflects comfortable debt servicing capacity, with EBIT-to-interest coverage averaging 2.22 times over recent periods.
Capital Efficiency Excellence
ITD Cementation demonstrates exceptional capital efficiency with a return on capital employed (ROCE) of 31.67% for the latest period, significantly above the 15-20% benchmark for quality infrastructure companies. The company's average ROCE of 29.38% over recent years reflects consistent value creation, whilst the return on equity (ROE) of 21.77% for the latest period—up from an average of 14.82%—indicates improving shareholder returns. These metrics underscore management's ability to deploy capital effectively in a capital-intensive sector.
Current assets of ₹5,102.88 crores as of March 2025 comfortably exceeded current liabilities of ₹4,475.09 crores, providing a healthy working capital cushion. Trade payables stood at ₹1,774.80 crores, up from ₹1,432.73 crores, reflecting the company's growing scale of operations. Fixed assets of ₹1,049.20 crores and minimal investments of ₹41.86 crores indicate an asset-light business model focused on execution capabilities rather than heavy infrastructure ownership.
The Margin Dynamics: Navigating Cost Pressures and Project Mix
A deeper examination of ITD Cementation's margin profile reveals both strengths and areas requiring attention. The operating margin excluding other income has shown resilience, improving from 9.12% in Q2 FY25 to 9.35% in Q2 FY26, despite the challenging revenue environment. This 23 basis point expansion suggests the company is successfully passing through cost inflation and winning projects with better economics.
However, sequential margin trends paint a more nuanced picture. Operating margins peaked at 10.46% in Q4 FY25 before moderating to 9.16% in Q1 FY26 and 9.35% in Q2 FY26. This volatility reflects the project-based nature of the construction business, where margins fluctuate based on project mix, execution stage, and contract terms. The company's ability to maintain margins above 9% consistently demonstrates pricing discipline and operational control.
Employee costs have shown steady growth, rising from ₹168.88 crores in Q2 FY25 to ₹202.36 crores in Q2 FY26—a 19.82% increase that outpaced revenue growth. This suggests either strategic hiring for future projects or wage inflation pressures. As a percentage of revenue, employee costs increased from 8.48% to 9.31%, indicating margin pressure from the labour component.
Other Income Contribution: A Double-Edged Sword
Other income of ₹38.54 crores in Q2 FY26 represented a significant 71.55% increase year-on-year from ₹22.47 crores, contributing meaningfully to profitability. Whilst this reflects efficient treasury management and non-core income generation, the volatility of other income—ranging from ₹7.51 crores to ₹38.54 crores across recent quarters—adds unpredictability to earnings. Core operating performance remains the critical driver, with other income providing supplementary support rather than fundamental strength.
Industry Context: Riding the Infrastructure Investment Wave
ITD Cementation operates in India's booming infrastructure sector, which continues to benefit from substantial government capital expenditure and private sector participation. The company's 9.27% year-on-year revenue growth in Q2 FY26, whilst modest compared to the sector's potential, reflects selective project bidding and execution capacity constraints rather than demand weakness.
The construction sector has witnessed robust order inflows across highways, metro rail, irrigation, and marine infrastructure segments—all areas where ITD Cementation has established capabilities. The company's order book and execution pipeline position it to capitalise on the multi-year infrastructure investment cycle, though near-term revenue volatility reflects project commissioning timelines and working capital deployment patterns.
Competitive intensity in the sector remains elevated, with numerous players vying for large-ticket projects. ITD Cementation's focus on complex, specialised projects—including metro rail, tunnelling, and marine structures—provides some insulation from pure price competition, allowing the company to command premium margins. The company's 31.52% five-year sales compound annual growth rate significantly outpaces the broader construction sector's growth, demonstrating market share gains and execution capabilities.
| Company | P/E Ratio (TTM) | P/BV Ratio | ROE (%) | Debt to Equity | Dividend Yield |
|---|---|---|---|---|---|
| ITD Cementation | 26.09 | 5.68 | 14.82% | 0.11 | 0.30% |
| IndiGrid Trust | 54.63 | 3.36 | 6.82% | 4.78 | 9.61% |
| IRCON International | 24.11 | 2.24 | 12.99% | -0.06 | 1.71% |
| Afcons Infrastructure | 24.75 | 2.31 | 9.32% | 0.52 | NA |
| Techno Electric | 26.53 | 3.07 | 10.71% | -0.66 | 0.88% |
| RITES | 25.91 | 4.06 | 18.02% | -1.17 | 2.65% |
ITD Cementation's peer comparison reveals a company trading at reasonable valuations relative to its operational performance. The P/E ratio of 26.09x sits comfortably within the peer range of 24-27x, despite the company's superior ROE of 14.82% compared to most peers. The price-to-book ratio of 5.68x appears elevated compared to peers averaging 2-4x, reflecting market recognition of the company's quality franchise and growth potential. Critically, ITD Cementation's debt-to-equity ratio of 0.11 positions it as one of the most conservatively leveraged players, providing significant financial flexibility that peers with higher leverage lack.
Valuation Analysis: Premium Justified by Growth and Quality
At the current market price of ₹676.45, ITD Cementation trades at a P/E ratio of 26.09x trailing twelve-month earnings, representing a 29.43% discount to the construction sector average P/E of 37x. This discount appears anomalous given the company's superior ROCE of 31.67%, robust five-year earnings CAGR of 57.01%, and pristine balance sheet with minimal leverage.
The price-to-book ratio of 5.68x might appear elevated at first glance, but it reflects the company's exceptional return on equity of 21.77% for the latest period. Companies generating ROE above 20% typically command P/BV multiples of 4-6x, making ITD Cementation's valuation reasonable rather than excessive. The EV/EBITDA multiple of 13.15x and EV/EBIT of 16.42x sit at moderate levels for a quality infrastructure company with strong growth visibility.
The PEG ratio of 0.84 suggests the stock trades below its growth rate, typically a sign of undervaluation. With a five-year EBIT growth rate of 57.01%, a PEG below 1.0 indicates the market hasn't fully priced in the company's growth trajectory. The valuation grade has shifted from "Expensive" to "Attractive" as of November 2025, reflecting the stock's 28.28% correction from its 52-week high of ₹943.20.
The dividend yield of 0.30% remains modest, with the company paying ₹2 per share and maintaining a conservative dividend payout ratio of 10.67%. This low payout reflects management's preference to retain capital for growth investments rather than distribute cash to shareholders—a strategy appropriate for a company in growth mode within a capital-intensive sector.
Shareholding Pattern: Promoter Confidence Amid Institutional Flux
The shareholding pattern reveals significant structural changes over recent quarters, most notably a dramatic increase in promoter holding from 46.64% in March 2025 to 67.46% in June 2025—a 20.82 percentage point jump. This substantial increase in promoter stake, maintained at 67.46% through December 2025, signals strong promoter confidence in the company's prospects and provides stability to the shareholder base. The promoter entity, Renew Exim DMCC, holds the entire promoter stake with zero pledging, eliminating any concerns about financial stress or forced selling.
| Shareholder Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter Holding | 67.46% | 67.46% | 67.46% | 46.64% | 0.00% |
| FII Holding | 8.19% | 8.36% | 9.21% | 13.95% | -0.17% |
| Mutual Fund Holding | 1.02% | 0.27% | 0.44% | 2.93% | +0.75% |
| Insurance Holdings | 0.02% | 0.02% | 0.00% | 0.52% | 0.00% |
| Other DII Holdings | 0.46% | 0.43% | 0.35% | 2.70% | +0.03% |
| Non-Institutional | 22.85% | 23.46% | 22.54% | 33.27% | -0.61% |
Foreign institutional investor (FII) holding has witnessed steady decline, falling from 13.95% in March 2025 to 8.19% in December 2025—a cumulative reduction of 5.76 percentage points. This FII exodus, particularly pronounced in the June quarter when holdings dropped 4.74 percentage points, coincided with the promoter stake increase, suggesting a potential change-of-control transaction or strategic restructuring. The continued FII selling in subsequent quarters, albeit at a slower pace, reflects either profit booking after the stock's multi-year rally or concerns about near-term execution challenges.
Mutual fund participation remains minimal at 1.02% as of December 2025, though it showed a sequential increase of 0.75 percentage points from September's 0.27%. The low institutional holding of just 9.69% overall indicates the stock remains under-owned by professional investors, potentially limiting liquidity but also providing room for institutional accumulation if the company delivers consistent performance. The presence of 164 FII investors and 12 mutual funds suggests broad-based interest despite the low aggregate holding.
Stock Performance: Exceptional Long-Term Returns, Recent Volatility
ITD Cementation's stock performance presents a tale of two narratives—spectacular long-term wealth creation overshadowed by recent price weakness. Over five years, the stock has delivered phenomenal returns of 902.15%, massively outperforming the Sensex's 64.22% gain by an alpha of 837.93 percentage points. The three-year return of 567.44% and two-year return of 110.11% similarly dwarf benchmark returns, establishing ITD Cementation as one of the top-performing infrastructure stocks over the medium to long term.
| Period | Stock Return | Sensex Return | Alpha | Absolute Performance |
|---|---|---|---|---|
| 1 Week | 6.94% | 0.91% | +6.03% | Outperformance |
| 1 Month | -10.66% | -2.49% | -8.17% | Underperformance |
| 3 Month | -21.63% | -0.17% | -21.46% | Sharp Underperformance |
| 6 Month | -9.68% | 3.23% | -12.91% | Underperformance |
| YTD (FY26) | -14.18% | -2.24% | -11.94% | Underperformance |
| 1 Year | 26.75% | 6.44% | +20.31% | Strong Outperformance |
| 3 Years | 567.44% | 36.94% | +530.50% | Exceptional Outperformance |
| 5 Years | 902.15% | 64.22% | +837.93% | Exceptional Outperformance |
However, the recent performance paints a more challenging picture. The stock has declined 21.63% over three months and 14.18% year-to-date in FY26, significantly underperforming the Sensex. The one-month return of -10.66% against the Sensex's -2.49% decline indicates stock-specific concerns beyond broader market weakness. Trading at ₹676.45, the stock sits 28.28% below its 52-week high of ₹943.20, though it remains 41.81% above its 52-week low of ₹477.00.
The stock's beta of 1.14 classifies it as a high-beta stock, meaning it tends to amplify market movements. With volatility of 41.80% over the past year—nearly four times the Sensex's 11.52%—ITD Cementation falls into the "high risk, high return" category. The risk-adjusted return of 0.64 exceeds the Sensex's 0.56, suggesting the stock has delivered superior returns relative to its volatility, though the elevated risk profile demands careful position sizing.
Investment Thesis: Quality Franchise at Reasonable Valuation
ITD Cementation's investment case rests on four pillars: quality fundamentals, attractive valuation following recent correction, strong long-term growth trajectory, and pristine balance sheet. The company's average quality grade reflects solid long-term financial performance characterised by 31.52% sales CAGR, 57.01% EBIT CAGR, and exceptional ROCE of 29.38% over recent years. Zero promoter pledging and low institutional holdings of 9.69% provide additional comfort on governance and future institutional buying potential.
The valuation grade shifted to "Attractive" in November 2025 following the stock's correction, with the P/E of 26.09x trading at a discount to the sector average despite superior fundamentals. The PEG ratio of 0.84 suggests the growth isn't fully priced in, whilst the EV/EBITDA of 13.15x appears reasonable for a company with 31.67% ROCE and minimal leverage.
However, the investment case faces headwinds from flat near-term financial trends and mildly bearish technical indicators. The financial trend grade downgraded from "Positive" to "Flat" in November 2025, reflecting the sequential revenue and profit decline in Q2 FY26. Technical indicators turned "Mildly Bearish" in February 2026, with the stock trading below all key moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), suggesting continued near-term price pressure.
KEY STRENGTHS
- Exceptional ROCE of 31.67% demonstrates superior capital efficiency and competitive advantages in complex infrastructure projects
- Strong five-year growth trajectory with sales CAGR of 31.52% and EBIT CAGR of 57.01% reflecting market share gains and execution capabilities
- Pristine balance sheet with debt-to-equity of just 0.11 and debt-to-EBITDA of 1.29x providing significant financial flexibility
- Promoter holding increased to 67.46% with zero pledging, signalling strong confidence and eliminating governance concerns
- Attractive valuation with P/E of 26.09x at discount to sector average of 37x despite superior fundamentals
- Improving ROE trajectory reaching 21.77% in latest period from average of 14.82%, indicating enhanced shareholder value creation
- Consistent operating margins above 9% demonstrate pricing power and operational discipline despite project-based volatility
KEY CONCERNS
- Sequential revenue decline of 14.43% in Q2 FY26 raises questions about order execution and project timing
- Flat financial trend grade reflects near-term earnings momentum concerns despite strong year-on-year growth
- Mildly bearish technical indicators with stock trading below all major moving averages suggest continued price pressure
- FII holding declined from 13.95% to 8.19% over three quarters, indicating institutional selling pressure
- High volatility of 41.80% and beta of 1.14 make the stock unsuitable for conservative investors
- Low institutional holding of 9.69% limits liquidity and could exacerbate price swings
- Rising employee costs outpacing revenue growth could pressure margins if not offset by operating leverage
Outlook: What Lies Ahead for ITD Cementation
The outlook for ITD Cementation hinges on the company's ability to convert its strong order book into revenue whilst maintaining margin discipline. The infrastructure sector's robust fundamentals—driven by government capital expenditure and private sector participation—provide a favourable operating environment. The company's specialisation in complex projects like metro rail, tunnelling, and marine structures positions it to capture premium margins in less competitive segments.
Near-term performance will depend on project execution velocity and working capital management. The sequential revenue decline in Q2 FY26 appears to be a timing issue rather than a structural concern, but consistency in execution will be critical to restore investor confidence. The company's pristine balance sheet with minimal leverage provides flexibility to bid aggressively for new projects without financial constraints.
POSITIVE CATALYSTS
- Strong order book conversion driving revenue acceleration in H2 FY26
- Margin expansion from improved project mix and operating leverage
- Institutional accumulation as FII selling abates and mutual funds increase positions
- Technical reversal above 200-day moving average triggering momentum buying
- Continued government infrastructure spending boosting order inflows
RED FLAGS TO MONITOR
- Continued sequential revenue declines indicating execution challenges
- Operating margin compression below 9% suggesting pricing pressure
- Further FII selling or promoter stake reduction
- Deteriorating working capital cycle stretching cash flows
- Technical breakdown below ₹650 support level accelerating selling
The stock's technical setup remains challenging with mildly bearish indicators and trading below all major moving averages. A sustained move above the 200-day moving average of ₹758.52 would signal technical reversal and potentially trigger momentum-based buying. Conversely, a break below the recent low of ₹670.95 could accelerate selling pressure towards the 52-week low of ₹477.00.
From a fundamental perspective, the company's 31.67% ROCE, improving ROE, and minimal leverage provide a strong foundation for long-term value creation. The 28.28% correction from the 52-week high has brought valuations to attractive levels, with the P/E of 26.09x and PEG of 0.84 offering reasonable entry points for investors with a 2-3 year horizon. However, the flat financial trend and mildly bearish technicals suggest waiting for signs of stabilisation before aggressive accumulation.
The Verdict: Quality Franchise Worth Holding Through Volatility
Score: 58/100
For Fresh Investors: Not recommended for fresh buying at current levels. Whilst the valuation has turned attractive following the recent correction, the combination of flat financial trends and mildly bearish technical indicators suggests waiting for clearer signs of revenue momentum and margin stability. Investors seeking entry should wait for either (a) consistent sequential revenue growth over 2-3 quarters, or (b) technical reversal above the 200-day moving average of ₹758.52. Those with high risk tolerance could consider building positions in tranches below ₹650.
For Existing Holders: Continue to hold. The stock's exceptional long-term track record (902.15% returns over five years), superior ROCE of 31.67%, and pristine balance sheet justify riding through near-term volatility. The 28.28% correction from the 52-week high has already priced in execution concerns, whilst the increased promoter holding to 67.46% signals confidence. Use any further weakness towards ₹600-650 as an opportunity to average down rather than panic selling. Set a stop loss at ₹600 (11.3% downside) to protect against extended correction.
Fair Value Estimate: ₹850-900 (25.7-33.1% upside), based on 30-32x P/E on FY27 estimated earnings of ₹28-30 per share, factoring in normalised execution and margin recovery. The stock offers compelling risk-reward for patient investors willing to look past 2-3 quarters of potential volatility.
Note— ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. The stock market involves risks, and investors may lose their entire investment.
