Buy JK Cement Ltd for the Target Rs.7,000 by Choice Institutional Equities
Pricing action to cushion rising cost headwinds
We maintain our BUY rating on JK Cement (JKCE) while revising our target price downwards to INR 7,000/share. Our investment thesis continues to be supported by: 1) Favourable cement sector tailwind driven by improving demand and healthy pricing outlook heading into FY27E, 2) Ongoing expansion with the total capacity expected to reach ~40 MTPA by FY28-end (vs. ~32.3 MTPA as of March 2026), 3) Strong focus on cost-efficiency through higher green power utilisation, targeted at 75% by FY30E and 4) A disciplined balance sheet strategy with net debt-to-EBITDA likely to remain comfortably below 2x. That said, we have factored in an increase of INR 154/t in FY27E cost, primarily reflecting management guidance of INR 150–200/t rise in fuel expense. Additionally, higher packaging cost (~INR 50/t) and a sharp increase of INR 10–12/litre in diesel price are likely to raise freight cost by ~INR 50–60/t, with the bulk of the impact expected in Q2FY27. However, a significant portion of this cost pressure is projected to be mitigated through a price hike, as the company has already implemented an average increase of ~INR 10 per bag in May to offset the existing inflationary environment. We anticipate EBITDA to expand at a CAGR of 16.8% over FY26–29E, driven by healthy volume growth assumptions of 8.0%/9.0%/10.0% and realisation growth of 3.5%/0.5%/0.5% across FY27E/FY28E/FY29E, respectively. We derive our 1-year forward target price of INR 7,000/share by assigning an EV/CE multiple of 3.5x to FY28E estimates.
Q4FY26: Cost inflation weighs on earnings despite strong sales
JKCE reported Q4FY26 consolidated revenue and EBITDA of INR 38,875 Mn (+8.6% YoY, +12.3% QoQ) and INR 6,825 Mn (-10.8% YoY, +22.4% QoQ) vs CIE estimate of INR 40,104 Mn and INR 6,901 Mn, respectively. Volume came in at 6.8 Mnt (+22.2% YoY, +13.3% QoQ) vs (CIE est. 6.8 Mnt).
Realisation/t came in at INR 5,717/t (-3.3% YoY and -1.0% QoQ), which is lower than CIE’s estimate of INR 5,893/t. Total cost/t came in at INR 4,713/t (+1.4% YoY and -2.7% QoQ). As a result, EBITDA/t came in at INR 1,004/t, a decrease of ~INR 258/t YoY and an increase of INR 75/t QoQ. Company Info BB Code JKCE IN EQUITY Face Value (INR) 10.0 52-week High/Low (INR) 7,565.0 / 4,800.8 Mkt Cap (Bn) INR 420.3 / USD 4.4 Shares o/s (Mn) 77.3 3M Avg. Daily Volume 75,239 Change in Estimates FY27E FY28E INR Bn New Old Dev. (%) New Old Dev. (%) Revenue 153.4 156.3 (1.8) 168.0 170.2 (1.3) EBITDA 26.9 28.3 (4.9) 32.2 32.5 (0.9) EBITDAM % 17.6 18.1 (56) bps 19.2 19.1 7 bps PAT 11.9 12.4 (4.4) 15.4 15.8 (2.8) EPS 153.8 160.9 (4.4) 199.2 204.9 (2.8)
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