Buy JK Lakshmi Cement Ltd for the Target Rs. 1,175 by Choice Institutional Equities
* Outlook: We upgrade JK Lakshmi Cement (JKLC) to BUY (from ADD) with a higher TP of INR 1,175 (vs. INR 970 earlier). The merger of UCWL and other subsidiaries removes the structural overhang, shifting focus to core fundamentals: (1) 4.4 MTPA capacity addition by FY28E, (2) volume growth of 6%/5%/10% over FY26E-28E via asset sweating, and (3) cost savings of INR 150/t over the next 3 years. We value JKLC on an EV/CE framework, capturing the strong ROCE expansion expected over FY25-28E.
* We forecast JKLC’s EBITDA to grow at a CAGR of 23.4% over FY25-28E, supported by our assumptions of volume growth at 6.0/5.0/10.0% and realization growth of 1.5/1.0/1.0% in FY26E/FY27E/FY28E, respectively.
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