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Capacity ramp-up props growth outlook

JK Cement ((JKCE IN) reported EBITDA of ~INR 6.7bn in Q4FY26, in line with our and consensus estimates, driven by strong double-digit grey cement volume growth, supported by improved demand and increasing presence in Central India. The management has guided for incremental cement volume sales of ~2.5mn tonnes in FY27, backed by ramp-up of recently commissioned capacities. While the recent price hikes across both trade and nontrade segments provide some cushion against inflationary pressures, further margin balancing will depend on the durability of price rise ahead of the monsoon. Incremental capacity ramp-up, operating leverage benefits, and cost-efficiency initiatives should further support profitability. Thus, we reiterate Accumulate with a lower SoTP-TP of INR 5,815.

Central India – Capacity ramp-up drives volume growth:

Grey cement volume rose ~12% YoY/ 15% QoQ to 6.12mn tonnes due to ramp up at JKCE’s new facilities in Central India and 65-70% utilization achieved on an expanded capacity base. White cement (including wall putty) volume rose ~15% YoY/ 8% QoQ to 0.5mn tonnes. Grey cement realization fell ~1% YoY, but recovered ~2% QoQ to INR 4,841/tonne, due to higher trade sales on sequential basis (at 68% versus 60% QoQ). White Cement (including putty) realization fell ~6% YoY/1% QoQ to INR 11,542/tonne. Blended operating costs rose ~1% YoY but fell ~2% QoQ to INR 4,552/tonne. Meanwhile, other operating income/tonne declined ~25% YoY and ~24% QoQ due to lower GST-linked incentives, expiry of benefits at the Aligarh unit and delayed accrual of Bihar incentives. Consequently, blended EBITDA/tonne (including other operating income) declined ~19% YoY, though it improved ~9% QoQ to INR 1,012.

Expansion completed, next growth phase underway:

In Q4FY26, JKCE commissioned its ongoing expansion in Central India and Bihar, along with a 1.0mn tonnes debottlenecking at Muddapur. Other ongoing cement and clinker expansion projects are on track and scheduled for completion by H1FY28. Also, the 0.6mn tonnes white putty plant at Nathdwara is likely to be commissioned by September 2026. FY30 targets remain intact unless prolonged geopolitical disruptions materially impact industry demand and cash flows.

Reiterate Accumulate with a lower TP of INR 5,815:

Expect JKCE’s near-term volume growth to be healthy, led by ramp-up at its newly-added capacity in Central India. A strong pipeline of ongoing expansion projects and proven execution track record offer long-term volume growth visibility. However, we trim our estimates by ~18% for FY27E and ~5% for FY28E to account for rising cost pressure. So, we lower our TP to INR 5,815 (from INR 6,249). We introduce FY29E. We roll forward to March 2028E from December 2027E and ascribe 14.0x (unchanged) EV/EBITDA to the grey cement business, while valuing white cement (including wall putty) and paint businesses at 16x EV/EBITDA and 4x EV/sales, respectively, on March 2028E. Reiterate Accumulate. Subdued demand, weak pricing, and higher fuel costs exist, and aggressive ramp-up of acquired JP Group assets in Central India remain key risks.

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