Motilal Oswal Recommends JK Cement as a Buy with a Price Target of Rs 6040

JK Cement Sees Healthy Domestic Demand Amid Rising Cost Pressures

JK Cement's management has reported a healthy domestic demand trend in the fourth quarter of fiscal year 2026, driven by broad-based demand across key segments. The pricing environment remains mixed, with stronger traction in the non-trade segment relative to trade.

However, the company is facing elevated input cost pressures, primarily due to a $20 per ton rise in petcoke prices, which is expected to result in an incremental cost impact of INR75-80 per ton. Additionally, higher packaging costs are anticipated to lead to an increase in overall operating expenses per ton in the first quarter of fiscal year 2027.

Despite these challenges, JK Cement has outlined ongoing cost-saving initiatives, including a higher green power share and logistics optimization, which are expected to partly offset the impact of these cost pressures.

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JK Cement's Expansion Strategy

JK Cement has outlined an aggressive capex-led expansion strategy, targeting a capacity of over 50 million tons per annum (mtpa) over the medium term. The company plans to achieve a phased ramp-up to approximately 40 mtpa by the first half of fiscal year 2028 and 45 mtpa by fiscal year 2029, driven by key projects such as Jaisalmer, Mudappur, and Panna. The company has pegged its capex at INR90 billion over fiscal years 2026-28 across these key projects, which is expected to lead to an increase in net debt to INR79 billion by fiscal year 2028.

Outlook and Valuation

We have cut our EBITDA estimates by approximately 8% for fiscal years 2027 and 2028, mainly due to rising cost pressures. We value JK Cement at 17 times fiscal year 2028 estimated enterprise value to EBITDA to arrive at our revised target price of INR6,040. We reiterate our BUY recommendation.

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Note: The table above shows the revised EBITDA estimates for fiscal years 2027 and 2028.