Buy JK Cement Ltd For Target Rs. 7,050 By JM Financial Services
JK Cement (JKCE) standalone EBITDA grew 41% YoY/ declined 8% QoQ to INR 6.8bn— beating our estimates by 4% (and consensus by 9%)—driven mainly by higher other operating income. Blended EBITDA/tn rose 23% YoY/ declined 1% QoQ to INR 1,247 (JMFe: INR 1,215). In 1Q, JKCE increased grey cement capacity by 0.5mt; it also announced 0.6mt wall putty expansion at a capex of INR 2bn to be commissioned by FY27. 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 (targeting INR 40-50/tn in FY26), and despite factoring-in capex of INR 58bn through FY28E, we expect net debt to remain contained at INR 30bn-35bn, supported by healthy cash flow generation. Incorporating the 1Q outperformance, positive pricing outlook and expansion in wall putty segment, we raise our FY26–28 EBITDA estimates by 3-4%. We revise our target multiple to 17.5x (from 16.5x) given growth visibility, controlled leverage and improving return ratios. We maintain BUY with a revised Sep’26 target price of INR 7,050/sh post half yearly roll-over. JKCE remains our top pick in the mid-cap cement space.
* Result Summary: On a standalone basis, JKCE reported overall volume growth of ~14%YoY (decline of 7% QoQ) to 5.4mt in 1QFY26. Grey cement volume grew 15% YoY/ declined 8% QoQ to 5mt led by significant growth in Central (>50% YoY vols. growth) and Bihar markets along with higher clinker sales, while realisation grew ~6% YoY/ 1% QoQ to INR 4,938. Volume of white cement and wall putty grew ~8% YoY/ declined 2% QoQ to 0.42mt. Total cost/tn was flat YoY/ grew 2% QoQ to INR 4,584 (in line with our estimates). Other operating income increased ~38% YoY/ 3% QoQ to INR 1.22bn (~INR 226/tn). On a consolidated basis, overall volume grew by 15% YoY/ declined ~7% QoQ to ~5.6mt in 1QFY26 with blended EBITDA/tn of INR 1,226. Subsidiaries implied EBITDA grew 92% YoY/ declined 51% QoQ to INR 139mn led by higher losses in the paints business.
* What we liked: Better-than-expected profitability; higher other operating income
* What we did not like: Increase in net debt Earnings Call KTAs: 1) JKCE maintains grey cement vol. guidance of 20mt (+11% YoY) in FY26. 2) Spot cement prices are broadly flat compared to Jun’25 exit prices. 3) Maintains its cost/tn reduction target of INR 150-200/tn over the next 2-3 years; aims savings of INR 40-50/tn in FY26. 4) Paints revenue rose by 43% YoY/ 18% QoQ to INR 860mn in 1QFY26. 5) Targets to maintain Net debt:EBITDA below 2x. 6) Guided INR 20bn capex for FY26. 7) Project updates: i) Increased cement capacity by 0.5mt through debottlenecking in Ujjain plant; ii) Approved expansion to set up 0.6mt white cement based wall putty plant near Nathdwara, Rajasthan, at a proposed capex of INR 2bn to be commissioned by FY27; iii) 4mt clinker/ 1mt cement at Panna, 1mt capacities at Hamirpur and Prayagraj and 3mt split GU at Bihar are on track and expected to be commissioned by Dec’25.
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SEBI Registration Number is INM000010361
