The cement sector has delivered a positive surprise in the September quarter earnings. The consolidated volume growth for 14 listed companies was 5 percent year-on-year (YoY) in Q2FY21 due to the sustained rural demand and overall pick-up in the infrastructure segment, said global brokerage firm JM Financial.

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According to the brokerage house, the cement sector remains healthy even more so as companies have upped their volume guidance.

The gradual reopening of the economy has fared well for the realty sector and the businesses associated with it. Steady demand in residential property has led to company managements staying positive on the future growth given that they're gearing to resume capex now.

According to the brokerage, weighted average EBITDA/tonne recorded significant growth of 33 percent YoY in Q2 despite the demand challenges. EBITDA/t was led by improvement in realisations and strong cost control measures adopted by the players.

"Cost control remained a big factor to play out in the foregone quarter, and most companies knew how to effectively lower down expenses. For instance, in Q2, raw material costs increased by 8 percent YoY which was balanced out with low power/fuel costs. Employee expenses/tonne also declined as operating leverage kicked in. A lot of cement companies strategically controlled their expenses through renegotiation of third-party contracts and deferring discretionary spending," it said.

Both demand momentum and cost control helped the companies to report profitability this quarter, added the report.

Growth capex is gradually picking up pace on increasing comfort and visibility on volume growth. As per management commentary, the industry is expected to offset the decline in volumes seen in Q1 during the rest of the period this year, the brokerage added.

It continued to remain selectively positive on four cement stocks - Shree Cement, UltraTech Cement, Dalmia Bharat and JK Cement.