The stock, trading at ₹73.85 as of February 9, 2026, has declined 25.40% over the past year, significantly underperforming both the broader market and its sectoral peers. With the company struggling to translate revenue growth into bottom-line profitability, investors remain cautious about near-term earnings visibility.
The third quarter witnessed a modest sequential revenue recovery, with net sales climbing to ₹410.19 crores from ₹385.64 crores in Q2 FY26. However, this 6.37% quarter-on-quarter improvement failed to restore profitability, as the company continued to grapple with elevated operating costs and subdued pricing power. Year-on-year revenue growth of 8.66% suggests improving demand conditions, yet the inability to convert this into positive earnings underscores structural margin challenges.
| Quarter | Revenue (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | Operating Margin | PAT Margin |
|---|---|---|---|---|---|
| Dec'25 | 410.19 | +6.37% | -10.29 | 0.23% | -2.51% |
| Sep'25 | 385.64 | -8.95% | -10.98 | -2.52% | -2.85% |
| Jun'25 | 423.57 | -11.40% | 16.85 | 8.22% | 3.98% |
| Mar'25 | 478.05 | +26.64% | 32.91 | 11.03% | 6.88% |
| Dec'24 | 377.50 | +27.41% | -4.36 | 2.06% | -1.15% |
| Sep'24 | 296.28 | -23.20% | -31.43 | -13.44% | -10.61% |
| Jun'24 | 385.80 | — | 9.86 | 5.99% | 2.56% |
Financial Performance: Margin Compression Overshadows Volume Gains
Saurashtra Cement's Q3 FY26 performance presents a troubling narrative of margin erosion despite volume recovery. Net sales of ₹410.19 crores marked an 8.66% year-on-year increase, suggesting improved cement demand in the company's core Gujarat market. However, operating profit (PBDIT excluding other income) stood at a meagre ₹0.95 crores, translating to an operating margin of just 0.23%—a dramatic deterioration from the 2.06% achieved in Q3 FY24 and significantly below the 11.03% recorded in Q4 FY25.
The company's inability to maintain pricing discipline amid rising input costs has severely impacted profitability. Employee costs rose to ₹27.81 crores in Q3 FY26 from ₹29.69 crores in Q3 FY24, whilst other operating expenses continued to pressure margins. The net loss of ₹10.29 crores, though marginally better than Q2 FY26's loss of ₹10.98 crores, highlights the persistent challenges in achieving operational efficiency.
On a nine-month basis for FY26, the company has reported a cumulative net loss of ₹4.42 crores, a stark reversal from the profit of ₹25.35 crores recorded in the corresponding period of FY25. This deterioration reflects both weaker realisations and elevated cost structures that have yet to normalise despite improving demand conditions.
Operational Challenges: Weak Returns and Elevated Costs
Saurashtra Cement's operational metrics reveal fundamental challenges in capital efficiency and cost management. The company's average return on equity (ROE) of 4.07% remains substantially below industry standards, indicating inefficient utilisation of shareholder capital. The latest ROE of 3.03% further underscores the deteriorating profitability trajectory. Similarly, the average return on capital employed (ROCE) of 5.61% reflects suboptimal returns on invested capital, with the latest ROCE at 5.27%.
The balance sheet, whilst relatively conservatively leveraged, shows signs of strain. Long-term debt increased to ₹32.92 crores as of March 2025 from ₹10.40 crores in March 2024, suggesting capital infusion requirements to support operations. However, the company maintains a net cash position with a debt-to-equity ratio of -0.15, providing some financial flexibility. Trade payables stood at ₹200.95 crores, marginally lower than ₹204.32 crores in the previous year, indicating stable working capital management despite operational pressures.
Employee costs have remained elevated, averaging around ₹30 crores per quarter, which when combined with other fixed costs, creates significant operating leverage challenges. The company's EBIT to interest coverage ratio of 4.13 times, whilst adequate, has weakened from stronger historical levels, reflecting margin compression and rising interest costs.
Critical Concern: Persistent Margin Weakness
Operating margins have collapsed to 0.23% in Q3 FY26, down from 11.03% in Q4 FY25. This dramatic deterioration reflects both pricing pressures in the cement industry and the company's inability to optimise its cost structure. With negative net profit margins for two consecutive quarters, the path to profitability remains uncertain without significant operational improvements or industry-wide pricing discipline.
Industry Context: Cement Sector Headwinds Persist
The Indian cement industry has faced considerable headwinds through FY26, characterised by intense competition, oversupply in certain regions, and volatile input costs. Whilst demand has shown signs of recovery supported by infrastructure spending and housing activity, pricing power remains constrained due to excess capacity additions across the industry.
Saurashtra Cement, operating primarily in Gujarat, faces competition from both large integrated players and regional manufacturers. The company's relatively small scale (market cap of ₹811 crores) limits its ability to compete on cost efficiency compared to larger peers who benefit from economies of scale. The cement sector's average P/E ratio of 40x suggests that investors are pricing in recovery expectations, yet Saurashtra Cement's own P/E of 29x reflects scepticism about its near-term earnings potential.
The company's 5-year sales CAGR of 24.65% demonstrates strong historical growth, yet this has not translated into sustainable profitability. The 5-year EBIT CAGR of -10.16% highlights the deterioration in operating profitability over the medium term, a concerning trend that requires immediate management attention and strategic recalibration.
Peer Comparison: Valuation Discount Reflects Fundamental Weakness
Comparing Saurashtra Cement with its peer group reveals why the stock trades at a significant discount to industry multiples. Whilst the company's P/E ratio of 28.51x appears reasonable relative to peers, the underlying profitability metrics tell a different story. The company's ROE of 4.07% lags substantially behind peers such as Shree Digvijay Cement (17.83%), NCL Industries (9.67%), and Mangalam Cement (8.85%).
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| Saurashtra Cement | 28.51 | 0.86 | 4.07 | -0.15 | — |
| Mangalam Cement | 26.63 | 2.41 | 8.85 | 0.58 | 0.19% |
| Sanghi Industries | NA (Loss Making) | 3.96 | 1.06 | 5.92 | — |
| Shree Digvijay Cement | 29.62 | 2.87 | 17.83 | 0.37 | 2.12% |
| Deccan Cements | 30.81 | 1.37 | 8.77 | 0.85 | 0.08% |
| NCL Industries | 15.09 | 0.96 | 9.67 | 0.27 | 1.58% |
The company's price-to-book ratio of 0.86x represents a significant discount to peers, with most comparable companies trading at P/BV multiples above 2.0x. This valuation discount reflects investor concerns about the quality of earnings and return profile. Whilst Saurashtra Cement maintains a net cash position (negative debt-to-equity of -0.15), this advantage is overshadowed by weak profitability and operational inefficiency.
The absence of dividend yield further distinguishes Saurashtra Cement from peers like Shree Digvijay Cement (2.12% yield) and NCL Industries (1.58% yield), limiting its appeal to income-focused investors. The company's market capitalisation of ₹811 crores positions it as the smallest player in this peer group, which constrains its competitive positioning and limits institutional interest.
Valuation Analysis: Discount Warranted by Weak Fundamentals
At the current market price of ₹73.85, Saurashtra Cement trades at a P/E ratio of 29x trailing twelve-month earnings, which appears elevated given the company's deteriorating profitability trajectory. The stock has declined 42.48% from its 52-week high of ₹128.38, reflecting investor recognition of the fundamental challenges facing the business.
The company's price-to-book ratio of 0.86x suggests the market values the business below its stated book value of ₹85.17 per share, indicating scepticism about asset quality or earning power. The EV/EBITDA multiple of 7.97x appears reasonable on the surface, yet this metric can be misleading given the company's negative operating profits in recent quarters. The EV/Sales ratio of 0.41x reflects the low-margin nature of the business and limited pricing power.
Historical valuation trends show the stock moved from "Fair" to "Expensive" to "Risky" to "Attractive" and finally to "Very Expensive" within the span of a few months in 2025, suggesting high volatility in market perception. The current "Very Expensive" classification appears incongruous with the weak fundamental performance, likely reflecting the low absolute price rather than attractive relative valuation.
Shareholding Pattern: Stable Promoter Holding, Minimal Institutional Interest
The shareholding pattern of Saurashtra Cement reveals a stable promoter base with minimal institutional participation. Promoter holding has remained steady at 66.70% over the past four quarters, with a marginal decline from 66.77% in December 2024. The absence of promoter pledging (0%) provides comfort regarding financial stability, though the lack of share buybacks or open market purchases suggests limited confidence in near-term value creation.
| Quarter | Promoter | FII | MF | Insurance | Other DII | Non-Inst |
|---|---|---|---|---|---|---|
| Dec'25 | 66.70% | 0.20% | 0.00% | 0.12% | 0.00% | 32.98% |
| Sep'25 | 66.70% | 0.04% | 0.00% | 0.12% | 0.00% | 33.15% |
| Jun'25 | 66.70% | 0.02% | 0.00% | 0.12% | 0.00% | 33.16% |
| Mar'25 | 66.70% | 0.04% | 0.00% | 0.12% | 0.25% | 32.88% |
| Dec'24 | 66.77% | 0.01% | 0.00% | 0.12% | 0.25% | 32.84% |
Foreign institutional investor (FII) holding increased marginally to 0.20% in December 2025 from 0.04% in September 2025, though this represents minimal absolute interest. Mutual fund holdings remain at zero, highlighting the stock's absence from institutional portfolios. The complete exit of other domestic institutional investors (DIIs) from 0.25% in March 2025 to 0.00% by June 2025 signals waning institutional confidence.
Total institutional holding stands at a meagre 0.33%, one of the lowest amongst listed cement companies, which constrains liquidity and limits analyst coverage. The high non-institutional shareholding of 32.98% suggests retail investor dominance, which can contribute to higher volatility and limited price discovery.
Stock Performance: Severe Underperformance Across Timeframes
Saurashtra Cement's stock performance has been dismal across most relevant timeframes, significantly underperforming both the broader market and its sectoral peers. Over the past year, the stock has declined 25.40% compared to the Sensex's gain of 7.97%, resulting in negative alpha of -33.37 percentage points. The underperformance versus the cement sector (which returned 9.38%) stands at -34.78 percentage points, highlighting company-specific challenges beyond industry headwinds.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +2.96% | +2.94% | +0.02% |
| 1 Month | -4.44% | +0.59% | -5.03% |
| 3 Months | -24.57% | +1.02% | -25.59% |
| 6 Months | -37.20% | +5.27% | -42.47% |
| YTD | -9.82% | -1.36% | -8.46% |
| 1 Year | -25.40% | +7.97% | -33.37% |
| 2 Years | -32.17% | +17.42% | -49.59% |
| 3 Years | +38.56% | +38.25% | +0.31% |
The stock's risk-adjusted return of -0.57 over the past year, combined with volatility of 44.88%, places it in the "HIGH RISK LOW RETURN" category—an unfavourable combination for investors. The stock's beta of 1.25 indicates higher volatility than the broader market, amplifying downside risk during market corrections.
From a technical perspective, the stock has been in a bearish trend since December 16, 2025, when it broke down from ₹83.50. Currently trading at ₹73.85, the stock hovers just 9.88% above its 52-week low of ₹67.21, with immediate resistance at the 20-day moving average of ₹74.08. All major moving averages (50-day, 100-day, 200-day) are positioned above the current price, suggesting sustained downward pressure.
Investment Thesis: Weak Fundamentals Outweigh Valuation Appeal
The investment case for Saurashtra Cement faces significant headwinds across multiple parameters. The company's quality grade of "AVERAGE" reflects modest long-term financial performance, whilst the financial trend classification of "FLAT" for Q3 FY26 indicates stagnating operational metrics. The bearish technical trend adds further caution for momentum-focused investors.
From a valuation perspective, whilst the stock trades at a discount to book value (P/BV of 0.86x) and below industry P/E multiples, this discount appears warranted given the weak return profile. The company's ROE of 4.07% and ROCE of 5.61% fall well short of the cost of capital, suggesting value destruction rather than creation. The absence of dividend yield eliminates any income component to total returns.
The proprietary Mojo score of 34/100 with a "SELL" rating reflects the confluence of negative factors: bearish technical trend, flat financial performance, poor long-term operating profit growth (-10.16% CAGR over 5 years), and deteriorating quarterly results. The score has remained in the "SELL" category since October 2025, when it downgraded from "HOLD" at ₹102.00.
Key Strengths & Risk Factors
KEY STRENGTHS
- Net Cash Position: Debt-to-equity ratio of -0.15 provides financial flexibility and cushion against industry downturns
- Zero Promoter Pledging: No pledged shares demonstrates promoter confidence and financial stability
- Revenue Growth Momentum: 5-year sales CAGR of 24.65% shows strong top-line expansion capability
- Stable Promoter Holding: Consistent 66.70% promoter stake indicates long-term commitment
- Improving Volumes: Sequential revenue growth of 6.37% in Q3 FY26 suggests demand recovery
- Dividend Track Record: Historical dividend payout ratio of 39.22% demonstrates shareholder-friendly approach
KEY CONCERNS
- Persistent Losses: Two consecutive quarters of net losses with no clear path to profitability restoration
- Margin Collapse: Operating margins compressed to 0.23% from historical levels above 10%
- Weak Return Profile: ROE of 4.07% and ROCE of 5.61% indicate capital inefficiency and value destruction
- Negative EBIT Growth: 5-year EBIT CAGR of -10.16% highlights deteriorating operational profitability
- Minimal Institutional Interest: Total institutional holding of just 0.33% limits liquidity and analyst coverage
- Severe Stock Underperformance: 1-year return of -25.40% with negative alpha of -33.37% versus Sensex
- High Volatility: Beta of 1.25 and volatility of 44.88% create unfavourable risk-return profile
Outlook: What to Watch
POSITIVE CATALYSTS
- Sustained revenue growth with improving volume offtake in core markets
- Industry-wide pricing discipline leading to improved cement realisations
- Successful cost optimisation initiatives restoring operating margins above 5%
- Return to quarterly profitability with positive PAT in Q4 FY26
- Increased institutional participation improving liquidity and valuation multiples
RED FLAGS TO MONITOR
- Further margin compression below current levels of 0.23%
- Continued quarterly losses extending into Q4 FY26 and beyond
- Deterioration in working capital with rising debtor days or inventory levels
- Increased debt levels to fund operations, eroding the current net cash advantage
- Technical breakdown below 52-week low of ₹67.21 signalling further downside
The path forward for Saurashtra Cement requires urgent operational restructuring and margin recovery. Without demonstrable improvement in profitability metrics over the next two quarters, the investment case remains challenged despite the low absolute valuation. The cement industry's structural overcapacity and intense competition suggest that only the most efficient operators will thrive, and Saurashtra Cement's current operational metrics do not inspire confidence in its ability to compete effectively.
For investors, the risk-reward equation appears unfavourable at current levels. Whilst the stock trades at a discount to book value, this discount reflects genuine concerns about earning power and return on capital. The absence of institutional interest, combined with bearish technical trends and flat financial performance, suggests limited near-term catalysts for meaningful appreciation.
The Verdict: Structural Challenges Warrant Caution
Score: 34/100
For Fresh Investors: Avoid initiating positions until the company demonstrates at least two consecutive quarters of positive net profit with operating margins recovering above 5%. The current risk-reward profile is unfavourable, with significant downside risk if profitability does not materialise.
For Existing Holders: Consider reducing exposure on any technical bounce towards ₹80-85 levels. The persistent margin pressures and weak return profile suggest limited upside potential in the near to medium term. Hold only if convinced of management's ability to execute a credible turnaround strategy.
Fair Value Estimate: ₹65-70 (10-15% downside risk from current levels of ₹73.85), based on normalized earnings potential and peer comparison. The stock may find support at book value levels around ₹85, but only if operational metrics stabilise.
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.
