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Strong volume growth; operating performance improves

Positive cement demand outlook; capacity expansion on track

* JSW Cement’s (JSWC) 1QFY26 revenue/EBITDA increased ~8%/39% YoY to INR15.6b/INR3.2b. EBITDA/t surged ~29% YoY/45% QoQ to INR975. OPM was up 4.6pp YoY at ~21%. Adjusted PAT (exceptional fair value loss arises from conversion of CCPS into equity share of INR14.7b) stood at INR1.1b as compared to net loss of INR151m in 1QFY25.

* Management indicated that a good monsoon, increased government infra spending, and GST reforms bode well for the industry’s demand outlook. It anticipates cement demand growth at 6.5%-7.5% in FY26. Its cost saving (increase in green power, AFR usages, lead distance optimization) and revenue growth (introduction of premium products) initiatives are likely to yield INR400/t over the next two years. In terms of expansions, Sambalpur GU (1.0mtpa) is expected to be commissioned in Sep’25, while Nagaur integrated plant (3.3mtpa/3.5mtpa clinker/grinding) is expected to be commissioned in FY26.

* We recently initiated coverage on JSWC with Neutral rating. We maintain our earnings estimates. At CMP, the stock is trading at 17x/14x FY27E/FY28E EV/EBITDA. We value it at 15x Sep’27E EV/EBITDA to arrive at our TP of INR163. Maintain Neutral.

Sales volume increases ~8% YoY; cement realization/t up ~3% YoY

* Consolidated revenue/EBITDA stood at INR15.6b/INR3.2b (up 8%/39% YoY). Adjusted PAT stood at INR1.1b vs. net loss of INR151m in 1QFY25. Total sales volume increased ~8% YoY to 3.3mt. Cement volume was up ~10% YoY to 1.85mt and GGBS volume was up ~5% YoY to 1.30mt. Cement realization increased 3% YoY/6% QoQ to INR4,894. GGBS realization declined ~4% YoY (flat QoQ) to INR3,715. Blended realization was flat YoY at INR4,712/t (+3% QoQ)

* Opex/t declined ~6% YoY/4% QoQ as other expenses/freight cost per ton fell ~13%/6% and employee costs fell ~19% (special incentive paid in 1QFY25). However, variable cost per ton inched up ~1% YoY. Depreciation increased ~5% YoY, whereas finance costs declined ~28% YoY. Other income was down ~9% YoY.

Highlights from the management commentary

* Cement trade mix stood at 52% in 1QFY26. Clinker factor was at 51% and blended cement mix at 67%. GGBS sales are purely B2B in nature (nontrade).

* The share of green energy stood at 21.6% in 1QFY26 (vs. 21.5% in FY25). It aims to scale this up significantly to ~49% by FY26 end and ~63% by FY27.

* Capex is pegged at INR20b in FY26, with INR4.6b incurred in 1QFY26. Net debt increased to INR45.7b from INR42.0b as of Mar’25, due to additional borrowings for ongoing expansions.

Valuation and view

* We estimate a CAGR of ~19%/31% in revenue/EBITDA over FY25-28, driven by higher sales volume and pricing improvement. EBITDA/t is estimated to be INR920/INR964/INR993 in FY26/FY27/FY28 vs. INR699 in FY25 (CAGR of ~12% over FY25-28). Despite improvement in profitability, we expect debt to remain elevated, driven by higher capex of INR56b over FY25-28E. Net debt is estimated to be INR45.2b/INR55.1b/INR57.5b in FY26/27/28E vs. INR40.7b (ex-CCPS) in FY25. Net debt-to-EBITDA ratio is estimated to remain elevated at 3.6x/3.4x/3x in FY26/27/28E vs. 3.2x/4.7x in FY24/25.

* At CMP, JSWC trades at 17x/14x FY27E/28E EV/EBITDA and USD112/USD99 FY27E/FY28E EV/t (adjusted EV/t at USD128/126 for FY27E/28E, considering surplus grinding units). We value it at 15x Sep’27E EV/EBITDA to arrive at our TP of INR163. Maintain Neutral.

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