Buy JK Cement Ltd for the Target Rs. 7,700 by JM Financial Services Ltd
Next capex cycle kicks in; market share gains to continue
JK Cement (JKCE) aims to double its grey cement capacity to 50mt by FY30, (~15% CAGR, 2.5x ahead of industry forecast) underpinning robust volume growth and sustained market share gains over the coming years. In line with this ambition, the board has approved a greenfield expansion comprising a 4mt clinker and 3mt grinding unit in Jaisalmer, along with two split GU of 2mt each in Rajasthan and Punjab at a capex of INR 48.1bn (~USD 80/tn) targeted to commission by Sep’27. Even after factoring in capex of INR 70bn over FY26E– 28E, net debt-to-EBITDA is expected to remain 20% EBITDA CAGR), controlled leverage, and improving return ratios, we raise our target multiple by one notch to 18.5x. Incorporating the announced capex, we have increased our FY28 EBITDA estimates by ~2% and revised our target price to INR 7,700/sh based on Sep’27 EV/EBITDA. JKCE remains our top pick in the mid-cap cement space.
* Gaining scale through consistent execution: JKCE has maintained a steady capacity expansion trajectory, delivering a ~15% CAGR in grey cement capacity over FY19–25 to reach 25.3mt currently. Clinker and cement capacities are expected to rise to ~19.5mt and ~31mt, respectively, by Dec’25. Following the latest capex announcement, these will further expand to ~25mt clinker and ~39mt cement capacity by Sep’27, supporting robust volume growth (~14% CAGR—about 2x the industry forecast) and continued market share gains, in our view. The integrated plant under this project is eligible for a 10-year capital subsidy (~INR 10bn, as per our estimate), while the grinding units qualify for SGST benefits for seven years, effectively lowering the hurdle rate for investment. At 80–85% utilisation and factoring in capital subsidy benefit, we estimate the project will meet its cost of capital at an EBITDA/tn of INR 1,100–1,200.
* Jaisalmer – an emerging cement hub: Jaisalmer is rapidly evolving into a key cement cluster, driven by abundant limestone reserves, availability of land, easy access to inputs materials, and strong potential for solar power generation. The Rajasthan state government’s capital subsidy and SGST incentives further lower the hurdle rate for new investments. Several leading players, including UltraTech, Shree, JK Cement, and Birla Corp, have recently been declared preferred bidders for various limestone mines in the region (Exhibit 2). Wonder Cement has also commenced work on its integrated plant at Parewar, Jaisalmer. While infrastructure development is underway, the combination of competitively priced auctioned mines and other operational advantages positions the cluster to compete effectively with established cement-producing regions.
* Strong OCF to fund growth; leverage well-contained: With rising scale, JKCE’s balance sheet remains robust, and despite planned capex of INR 70bn over FY26E–28E, we expect consolidated net debt to peak at ~INR 40bn in FY27 (vs. INR 32bn in FY25). Net debt-toEBITDA is projected to remain <1.5x, supported by healthy operating cash flow generation through the period. We forecast a consolidated volume CAGR of ~13% over FY26E–28E, with EBITDA/tn improving to ~INR 1,260 by FY28E and return ratios staying comfortably above the cost of capital.
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