IGI Logo

Excellent Earnings Print; Premium Valuations Limit Upside

Est. vs. Actual for Q1FY26: Revenue – BEAT; EBITDA Margin – BEAT; PAT – BEAT

Change in Estimates post Q1FY26 (Abs)

FY26E/FY27E: Revenue: 1%/3%; EBITDA: 0%/3%; PAT: 4%/6%

Recommendation Rationale

* Growth Visibility on Volumes Remains Robust: The company’s capacity expansion program, targeting an addition of 6 MTPA, is progressing well and will raise its total Grey Cement capacity to 31.26 MTPA from the current 25.26 MTPA, implying a 12% capacity CAGR over FY20–FY27. The ramp-up of the recently commissioned capacity, along with the ongoing 6 MTPA expansion, is expected to drive strong volume growth going forward. As a result, the company is projected to deliver a volume CAGR of 13% over FY25–FY27E.

* Margin Expansion Expected Amid Cost Optimisation: The company delivered a strong operating performance during the quarter, supported by higher realisations and volume growth, leading to a 23% YoY improvement in EBITDA per tonne to Rs 1,226. This positive momentum is expected to sustain in FY26, backed by robust cement demand and better realisations. Management has guided for cost savings of Rs 150–200 per tonne over the next two years. Consequently, the company is expected to achieve an EBITDA margin in the range of 19%– 20% in FY26E/FY27E, driven by higher volumes, improved realisations, and ongoing cost optimisation initiatives.

* Eastern Expansion to Unlock New Growth Avenues; Central Region Remains a Key Contributor: Upon completion of the ongoing and planned capacity expansions, Central India is expected to contribute around 40% of the company’s total Grey Cement capacity. Additionally, the company’s further foray into the Eastern market is set to support sustained growth. The government's increased focus on infrastructure development in these regions is likely to drive a significant rise in per-capita cement consumption over the coming years. Backed by its strategic expansion initiatives, the company is well-positioned to capitalise on the rising cement demand in these markets. Accordingly, a revenue CAGR of 16% is projected over FY25–FY27E.

Sector Outlook:

Positive Company Outlook & Guidance: JKCL targets 10–11% volume growth in FY26, ahead of the industry estimate of 7–8%, reaffirming its strong market position. Cement prices are currently marginally lower than Q1FY26 levels. Management highlighted that market dynamics will be crucial in determining price sustainability, making pricing trends a key monitorable for FY26. Cement demand is expected to remain robust throughout the year, supporting topline momentum. Current Valuation: 16.5xFY27 EV/EBITDA (Earlier Valuation: 15x FY27 EV/EBITDA) and Paint business at 1x book value. Current TP: Rs 6,530/share; (Earlier TP: Rs 5,740/share) Recommendation: We change our rating from BUY to HOLD on the stock. Financial Performance JKCL delivered a strong operating performance during the quarter, driven by strong volume growth and higher cement realisations YoY. The company reported revenue, EBITDA, and PAT growth of 19%, 41%, and 75% YoY, respectively. APAT stood at Rs 324 Cr, reflecting a 75% YoY increase. EBITDA margins came in at 20.5%, above the anticipated 19.2%, and higher than 17.3% YoY. Consolidated volumes for the quarter, including both Grey and White Cement, reached 5.61 mtpa, marking a 15% YoY growth. The combined EBITDA per tonne improved to Rs 1,226, up 23% YoY. Cement realisations per tonne (Grey) increased by 1% QoQ to Rs 4,938, while the cost per tonne declined by 0.5% YoY to Rs 4,750.

For More Axis Securities Disclaimer https://simplehai.axisdirect.in/disclaimer-home

SEBI Registration number is INZ000161633