Reduce JSW Cement Ltd for the Target Rs. 125 by Emkay Global Financial Services Ltd
JSW Cement (JSWCL) reported consolidated EBITDA of Rs3.7bn (up 46%/28% YoY/QoQ), broadly in line with our estimates. Cement volumes increased 12% YoY (vs 8% industry growth), implying market share gains. Cement realization grew ~5% QoQ, led by a healthy pricing scenario in the non-trade segment during Q4FY26. JSWCL’s non-trade share stood at 49%, the second highest in the industry. The strong performance of the cement business was partly diluted by the GGBS segment, where volumes grew a modest ~5% YoY due to slag unavailability at the Dolvi unit and temporary disruptions at RMC plants in the western region. Inflation in unit (RM and power & fuel) costs was flat on both YoY and QoQ bases, but freight cost/t increased ~3% YoY and 6% QoQ on account of higher GGBS lead distances (volume reallocation across plants). Consequently, JSWCL reported blended EBITDA/t of Rs915 (Emkay: Rs918) vs Rs670 YoY and Rs800 QoQ. Assuming EBITDA/t of Rs1,250 in the GGBS segment, we imply unit EBITDA of ~Rs700/t in the grey cement business, placing JSWCL in the bottom half of our cement universe on an EBITDA/t basis in Q4FY26. We like JSWCL’s timely commissioning of the Nagaur, Rajasthan plant; however, a profitable ramp-up of the facility will remain a key monitorable, amid average demand forecasts for FY27. We broadly maintain our FY27/28 EBITDA estimates. At ~11x FY28E EV/EBITDA, the risk-reward ratio appears balanced, and we see limited upside to the stock. We value JSWCL at 11x EV/E and maintain REDUCE, while increasing our TP to Rs125 from Rs115 on better cash profile.
Healthy performance
JSWCL posted a healthy consolidated EBITDA of Rs3.65bn, in line with our estimate. Grey cement witnessed 12%/24% YoY/QoQ volume growth at 2.35mt, while realizations improved ~5% QoQ, resulting in cement revenue of Rs11bn (up 13%/30 YoY/QoQ). JSWCL reported only 1-2 days of revenue contribution from the Nagaur plant in Q4FY26. The GGBS segment was below expectations, as volumes grew 5%/3% YoY/QoQ, with 0.8% QoQ improvement in realization, resulting in GGBS revenue of Rs5.8bn (up 5%/3% YoY/QoQ). Other expenses, albeit down 3% QoQ on a high base, shot up 20% YoY due to the impact of FX losses (Rs134mn) and higher marketing expenditure for North operations (Rs230mn). Total operating costs/t declined 2% YoY but were up 2% QoQ. Adjusting for exceptionals, PAT stood at Rs1.57bn vs Rs342mn YoY.
Capacity at ~30mtpa by FY28E; profitable ramp-up of Nagaur key monitorable
We like the timely commissioning of the Nagaur, Rajasthan integrated unit, taking total capacity beyond 24mtpa. The timely ramp-up of this plant will be crucial for the company to deliver robust volume growth, given the optimal utilization of existing clinker units. JSWCL has also announced the addition of 2.5mtpa GU capacity at Nagaur, with a capex of Rs4.3bn, likely to be commissioned by Q4FY28. Along with other GUs, we see total capacity reaching ~30mtpa by FY28E.
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