Buy JK Cement Ltd For Target Rs. 5,850 By JM Financial Services
Strong execution justifies premium valuation
JK Cement (JKCE) delivered its highest-ever standalone EBITDA in 4QFY25, registering a robust 35% YoY and 50% QoQ growth to INR 7.4bn—beating our and consensus estimates by ~7% and 16%, respectively—driven largely by lower-than-expected cost/tn. Blended EBITDA/tn rose 17% YoY and 22% QoQ to INR 1,265 (JMFe: INR 1,220). The company remains on track to expand its grey cement capacity to ~30mt by FY26 and 50mt by FY30, supporting strong volume growth and market share gains in the coming years. With structural cost-saving levers of INR 150–200/tn (INR 40/tn already achieved in FY25), and despite planned capex of INR 57bn through FY28E, we expect net debt to remain contained at INR 30bn–35bn, supported by healthy cash flow generation. Incorporating the 4Q outperformance and a positive pricing outlook, we raise our FY26–27 EBITDA estimates by 4– 5% and revise our target multiple to 16.5x (from 16x) with revised Mar’26 target price of INR 5,850/sh. JKCE remains our top pick in the mid-cap cement space.
* Result summary: On a standalone basis, JKCE reported overall volume growth of 15%YoY/ 24% QoQ to 5.8mt in 4QFY25. Grey cement volume grew 15% YoY/ 25% QoQ to 5.4mt led by higher volume growth in the Central region, while realisation declined ~1% YoY/ grew 3% QoQ to INR 4,899; broadly in line with our estimate. Volume for white cement and wall putty grew 7% YoY/ 5% QoQ to 0.43mt. Further, total cost/tn fell 5% YoY/ 5% QoQ to INR 4,478 (JMFe: INR 4,534). Blended EBITDA/tn improved 17% YoY/ 22% QoQ to INR 1,265 (an increase of INR 225/tn sequentially). Other operating income increased 42% YoY/ 8% QoQ to INR 1.2bn (INR 203/tn). On a consolidated basis, overall volume grew by 16% YoY/ 23% QoQ to ~6.1mt in 4QFY25 while blended realisation declined ~1% YoY/ flat QoQ to INR 5,722 with blended EBITDA/tn of INR 1,263. Subsidiaries’ implied EBITDA +2.3x YoY/ +11.4x QoQ to INR 284mn on improvement in profitability of UAE operations.
* What we liked: Better-than-expected profitability, decline in net debt, turnaround in UAE operations
* Earnings Call KTAs: 1) JKCE expects grey/ total volume growth of ~20mt (+11% YoY)/ 22mt (+9% YoY) in FY26E. Majority of incremental volume growth likely to be driven by the Central region. The company expects incremental volume of 2-2.5mt (+9-11% YoY) to be easily achievable in FY27; 2) From exit of Mar’25, spot prices have increased by 1% in North and Central and 5-7% in the South respectively; 3) The company maintains its cost/tn reduction target of INR 150-200/tn over the next 2-3 years. On exit basis, it achieved overall cost savings/tn of ~INR 75/tn (incl. INR 35-40/tn in logistics) in FY25. Average cost savings stood at INR 40/tn in FY25, and it targets incremental savings of INR 25/tn in FY26, 4) Guided for capex of INR 18bn-20bn in FY26; 5) Project updates - i) 3.3mt clinker/ 1mt cement expansion at Panna, ii) 1mt cement capacities at Hamirpur and Prayagraj and iii) 3mtpa split grinding unit at Bihar are on track and expected to be commissioned by Dec'25-Jan’26. In FY25, capex of INR 12.2bn was incurred for the Panna, Hamirpur, and Prayagraj expansions, and INR 1.6bn for the Bihar split GU.
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