Upgrade to Buy JSW Cement Ltd for the Target Rs 146 by Motilal Oswal Financial Services Ltd
North ramp-up strengthens growth outlook Strong volume and efficiency gains in medium term support re-rating
* JSW Cement (JSWC) is well positioned for sustained medium-term growth, led by strong volume momentum, successful entry into North India and an improvement in cost structure in coming quarters with stabilization of its north India plant. Further, internal cost efficiency initiatives (AFR/renewable power/logistics efficiency) are estimated to reduce opex/t and support OPM. * Industry volumes grew 10-12% YoY in Jul-Aug’26, with JSWC volume broadly in line with industry on a like-for-like basis; however, including the north plant, overall volume growth was 23-25% YoY in Jul-Aug’26. Volume growth is estimated to be strong in Sep’26 as well, aided by a favorable base.
* Fuel cost is expected to remain broadly flat or rise marginally in 2QFY27, supported by low-cost inventory, while the ~40% GGBS mix provides lower exposure to fuel inflation and partly cushions near-term margin pressure. Further, variable cost/t at the North plant is expected to decline materially over the next six months as OLBC, AFR and WHRS become fully operational.
* We estimate a CAGR of ~20%/20%/15% in revenue/EBITDA/PAT over FY26- 28. JSWC is moving from a predominantly south/GGBS-led franchise toward a more diversified, integrated and geographically balanced cement company. At CMP, the stock is trading at 12x FY28E EV/EBITDA as compared to 14x on FY28E EV/EBITDA at its listing price. We upgrade our rating to BUY from Neutral. We value the company at 14x FY28E EV/EBITDA to arrive at our TP of INR146.
Volume momentum strong; Nagaur to accelerate growth
* Industry cement volume grew ~10-12% YoY in Jul-Aug’26, with JSWC volume largely in line with the industry growth on a like-to-like basis. However, including the North plant (Nagaur, Rajasthan), the company’s overall volume growth was ~23-25% YoY in Jul-Aug’26. The North plant continues to witness a steady ramp-up in utilization, reaching ~70% in 2QFY27 (QTD) as compared with ~55%/68% in 1QFY27/Jun’26 (average).
* The strong increase in cement volumes demonstrates that the North entry is gaining market acceptance faster than initially expected. The North plant should increasingly become a meaningful growth driver as utilization ramps up in FY27E. It is targeting 60%+ capacity utilization at North operation by end-FY27 (on expanded capacity of 3.5mtpa, with 2.5mtpa commissioned in end-Mar’26 and 1.0mtpa likely to be commissioned by end-Sep’26).
* JSWC is expanding capacity through a mix of greenfield/brownfield across India. It has outlined a robust capacity expansion roadmap, targeting an increase in grinding capacity from 24.1mtpa currently to 35.3mtpa by CY28 and to 46.0mtpa thereafter, providing strong medium-term volume growth visibility. Further, the company’s medium-term growth plan spread across regions enables it to transition from a regional player to a pan-India cement player. In parallel, clinker capacity is expected to rise from 9.7mtpa to 13.0mtpa, strengthening backward integration and supporting the grinding expansion.
Valuation and view
* JSWC is moving from a predominantly south/GGBS-led franchise toward a more diversified, integrated and geographically balanced cement company. The north India plant is key growth driver, providing both incremental capacity and access to a more profitable/balanced market.
* There would be near-term margin pressure due to higher input costs and weak pricing, which will be faced by all cement players. We believe the company’s variable cost to decline meaningfully over a medium term, led by stabilization of its north India plant and other key initiatives for cost reductions (AFR, renewable and logistics efficiency).
* At CMP, the stock is trading at 12x FY28E EV/EBITDA as compared to 14x FY28E EV/EBITDA at its listing price. Considering the company’s successful entry into the northern region, its ability to maintain leverage discipline, and earnings stability from exposure in GGBS, we upgrade our rating to BUY from Neutral. We value the company at 14x FY28E EV/EBITDA to arrive at our TP of INR146.
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