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Delivers sharpest QoQ margin recovery

JK Cement’s (JKCE IN) Q3FY25 EBITDA of ~INR 4.9bn was ~9% ahead of our/Consensus estimates each, primarily led by higher-than-expected other operating income. The key positive was that JKCE reported the sharpest QoQ recovery in EBITDA/tonne at INR 391, aided by better prices in North India and lower maintenance spending. The company has booked prior-period incentive of ~INR 150mn. Adjusted for this, EBITDA/tonne stood at INR 1,008, the highest in the listed space within companies that have declared numbers so far. While we raise our EBITDA estimates by ~2% for FY25E, we largely retain it for FY26E-27E. Most of JKCE’s capacity is located in North and Central India, where utilization is expected to be higher than pan-India average. Thus, we reiterate Accumulate with TP unchanged at INR 5,263.

JKCE enters high-margin Kashmir market:

JKCE’s expansion projects in Madhya Pradesh, Uttar Pradesh, and Bihar are on track. Apart from these organic expansions, it has announced the acquisition of a 60% stake in SAIFCO Cement (SAIFCO) for USD 96/tonne (INR 8,300) that has a clinker/cement capacity of 0.26/0.42mn tonnes in Kashmir. As per management, despite lower capacity utilization of 40%, SAIFCO enjoys an EBITDA/tonne of ~INR 1,500 and the unit is entitled to SGST exemption till CY31. Further, per the management, improving demand scenario with government impetus on investment and absence of any major national players in the targeted market bode well for JKCE’s growth prospects in the future. JKCE seeks to expand EBITDA/tonne to ~INR 2,000.

EBITDA/tonne up INR 391 QoQ:

Grey cement volume rose ~4% YoY/13% QoQ to 4.3mn tonnes. White cement (including wall putty) volume rose ~1% YoY/3% QoQ to 0.4mn tonnes. Grey cement realization fell ~8% YoY but rose ~1% QoQ to INR 4,757/tonne. White Cement (including putty) realization fell ~6% YoY (flat QoQ) to INR 12,103/tonne. Blended operating costs declined ~1% YoY/~6% QoQ to INR 4,728/tonne. Thus, blended EBITDA/tonne (excluding other operating income) contracted ~38% YoY but jumped ~81% QoQ to INR 669. EBITDA/tonne (including other operating income) fell ~22% YoY but rose ~60% QoQ to ~INR 1,040, with QoQ recovery at INR 391/tonne, the sharpest among reported results so far within Elara Cement universe.

Reiterate Accumulate; TP unchanged at INR 5,263:

We believe improved demand and ramp-up in recently-added capacity are key near-term volume growth triggers. Also, expect completion of ongoing expansion projects to prop long-term growth. While we raise our EBITDA estimate by ~2% for FY25E, we largely retain it for FY26E-27E.

We reiterate Accumulate with TP unchanged at INR 5,263, based on 14x (unchanged) March 2027E EV/EBITDA ascribed to grey cement, 14x (unchanged) March 2027E EV/EBITDA to white cement (including wall putty) and 2x March 2027E EV/sales to the paint business. Sub-par demand, weak cement price and a sharp rise in fuel price are key risks to our call.

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