Reduce JSW Cement Ltd For Target Rs. 135 By Emkay Global Financial Services Ltd
Poised for growth, though risk-reward ratio appears balanced
We initiate coverage on JSW Cement (JSWCL) with REDUCE and TP of Rs135, valuing it at 12x Sep-27E EV/EBITDA. We like JSWCL’s pace of capacity addition, viz ~13% over FY25-28E, which takes the overall capacity to ~30mtpa. A robust capacity addition will easily translate into best-in-class grey cement volume CAGR, which we estimate at ~19% over the same period. JSWCL’s forte—GGBS, a segment in which it commands ~84% market share, is likely to report ~15% CAGR in FY25-28E, led by strong demand across the infrastructure and residential segments. Total volume is expected to grow >16% per annum and reach ~20mt by FY28E. Further, we expect JSWCL to accrue operating leverage benefits of ~Rs150/t on better utilization of clinker output from its Shiva unit and ramp-up of its Nagaur plant. We bake in ~18%/32% revenue/EBITDA CAGR over FY25-28E, with improvement in blended EBITDA/t of Rs910 in FY26E to ~Rs980/~Rs1,000 in FY27E/FY28E, respectively. Key risks: weak cement prices in South India, delay in commissioning of the company’s Nagaur unit.
Blueprint ready to become a Pan-India player; capacity addition at faster rate…
With capital infusion of Rs16bn now behind, we see JSWCL adding capacity at a much faster rate, viz ~12% over FY25-30E vs 8% in the past 5Y. JSWCL has commissioned 1mtpa GU at Sambalpur, Odisha in Oct-25, and is on track to add 3.3/3.5mtpa clinker/cement capacities, taking the overall capacity to ~10/25mtpa, respectively, by Q2FY27E. On commissioning the greenfield project in Central India (Hatta, Madhya Pradesh, and related GU in UP), JSWCL is set to achieve total capacity of ~42mtpa in the medium term and become a Pan-India player. We expect JSWCL to spend cumulative capex of Rs55bn in FY26E-28E to achieve the intended capacity target/run-rate.
…resulting in robust volume growth and a higher volume market share
Backed by strong capacity additions, we expect grey cement volume at 12mt, implying ~19% CAGR over FY25-28E. Assuming industry CAGR at ~6.5% over FY25-28E, we see JSWCL’s grey cement market-share rise to >2% in FY28E vs ~1.5% in FY25. Similarly, aided by strong demand across the segments such as infrastructure, residential, and industrial, we estimate 15% volume CAGR for the GGBS (ground granulated blast furnace slag) segment over FY25-28. JSW Steel’s upcoming capacity additions in Dolvi, MH (5mtpa) and Vijayanagar, KR (2mtpa) ensure the requisite availability of in-house slag to support 15% CAGR in GGBS.
Higher incentive run-rate + operating leverage benefits to power EBITDA/t
JSWCL’s upcoming Nagaur plant (incentive: >Rs200/t by FY28E) would boost overall incentive run-rate of ~Rs25/t (FY25) to ~Rs40/t each in FY27E/FY28E. Also, JSWCL is likely to accrue operating leverage benefits of ~Rs150/t in FY25-28E on ramp-up of the Nagaur plant and optimal utilization of clinker from Shiva Cement (led by commissioning of the Sambalpur GU). Given such factors, along with a stable pricing scenario in South India, we see EBITDA/t of ~Rs910/980/1,000 in FY26/27/28E from ~Rs680 in FY25.
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