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Capacity expansion and market share gains underpin growth Strong volume momentum; cost pressures remain a monitorable

* JK Cement (JKCE) is expanding grey cement capacity to 40mtpa/50mtpa by FY28/FY30 vs. 32.3mtpa currently, with ongoing 7.0mtpa North expansion scheduled for commissioning in 1HFY28. It commissioned a 0.6mtpa wall putty plant in Rajasthan in 2QFY27, taking its overall white cement and wall putty capacity to 3.65mtpa. It plans to invest INR35-40b in FY27 and INR20- 25b in FY28 toward capacity expansion, maintenance capex, and coal blockrelated investments.

* JKCE delivered robust volume growth of ~15% YoY in FY26, outperforming industry demand growth of ~7-8%. The growth was supported by capacity expansion, timely ramp-up of new plants, and market share gains across key central Indian markets, while maintaining its presence in the North and South. With demand expected to remain supportive, it is targeting doubledigit volume growth in FY27.

* Its opex/t is estimated to increase ~4% YoY/QoQ in 2QFY27, led by higher variable and freight costs. However, it continues to focus on structural cost optimization through higher green power and alternative fuel usage, clinker optimization, and operating leverage. We estimate JKCE’s consolidated revenue/EBITDA/PAT CAGR at 17%/14%/7% over FY26-28. We anticipate the company’s consolidated volumes to post ~16% CAGR over FY26-28, and OPM at ~15-16% over FY27-28 (vs. ~17% in FY26).

* Given persistently elevated fuel prices, we recently lowered our FY27/FY28 EBITDA estimates by ~7%/6%, respectively, in our 2QFY27 quarterly preview. However, any price hikes to pass on the cost pressure in the nearterm pose upside risks to our earnings estimate. We value JKCE at 17x FY28E EV/EBITDA to arrive at our TP of INR5,960. Reiterate BUY.

JKCE’s aggressive capacity build-out targets 50mtpa by FY30

* JKCE remains on track with its aggressive capacity expansion plan, targeting grey cement capacity of 40mtpa/50mtpa by FY28/FY30 vs. current capacity of 32.3mtpa. The ongoing 7.0mtpa Northern expansion is progressing as scheduled, comprising a 4.0mtpa clinker/3.0mtpa grinding integrated plant at Jaisalmer, Rajasthan, and 2.0mtpa split grinding units each at Bikaner, Rajasthan and Punjab, targeted for commissioning in 1HFY28.

* The additional 10.0mtpa grinding capacity addition is under the planning stage. For its medium-term expansions, the company has planned Muddapur line 2, along with 1 or 2 split location grinding units in Maharashtra, to strengthen its market share in the region. Thereafter, the company plans to commission Panna line III, along with 2 split location grinding units. The 3.0mtpa Buxar grinding unit strengthens the company’s access to Bihar and adjoining eastern markets. Further, the acquisition (60% stake) in Saifco (0.42mtpa) expands its reach in the Jammu & Kashmir region.

* The company commissioned a 0.6mtpa wall putty plant in 2QFY27 in Rajasthan, taking the overall white cement and wall putty capacity to 3.65mtpa. It plans to invest INR35-40b in FY27 and INR20-25b in FY28, including expenditure on capacity expansion, sustaining capex, and coal block-related investments. These investments are expected to enhance capacity, secure coal availability at competitive costs, and expand renewable power sourcing, thereby supporting earnings growth.

View and valuation

* JKCE has targeted to reach 40mtpa/50mtpa grey cement capacity by FY28/FY30- 31. The company’s strong execution strategy is estimated to support doubledigit volume growth over the medium term. However, elevated fuel prices are likely to exert near-term cost pressures (estimates a sequential decline in profitability by INR150/t in 2QFY27). Any price hikes to pass on the cost pressure may drive earnings upgrade. We anticipate the company’s consolidated volumes to post ~16% CAGR over FY26-28. We estimate OPM in the range of ~15-16% over FY27-28 due to cost pressure vs. average at ~17% over FY24-26. We estimate its EBITDA/t at INR924/INR990 in FY27/FY28 vs. INR1,017 in FY26.

* We estimate JKCE to generate a cumulative OCF of INR50.1b during FY27-28, with cumulative capex estimated at INR62.0b over the same period. Given the heavy capex cycle, its net debt is estimated to surge to INR81.9b by FY28 vs. INR55.7b in FY26. The company’s net debt-to-EBITDA ratio is estimated to increase to 2.6x by FY28 vs. 2.3x in FY26. We anticipate its RoE/RoCE (post tax) to remain largely stable at ~14%/10% by FY28.

* At CMP, the stock is currently trading at 17x/15x FY27/FY28E EV/EBITDA. We value JKCE at 17x FY28E EV/EBITDA to arrive at our TP of INR5,960. We reiterate our BUY rating on the stock

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