JK Cement volume growth and North India expansion outweigh near-term cost pressure

Investment View and Recommendation

Prabhudas Lilladher’s July 21, 2026 report views JK Cement’s growth outlook as intact despite near-term cost headwinds. The broker maintained its ACCUMULATE recommendation and revised the target price to Rs 6,205 from Rs 6,227.

The constructive view is based on volume-led growth, market-share gains, ramp-up of recently commissioned capacity, execution of expansion projects, premiumisation, green power and future captive coal-block benefits.

Q1 FY27 Operating Performance

JK Cement reported an inline Q1 FY27 operating performance. Consolidated revenue rose 20.3 per cent year on year and 3.7 per cent quarter on quarter to Rs 40,317 million, 7.2 per cent above Prabhudas Lilladher’s estimate of Rs 37,606 million.

Consolidated cement volumes increased 17.6 per cent year on year to 6.61 mt, supported by the ramp-up of the 6 mtpa expansion. Grey cement volume grew 18 per cent to 6.0 mt, while white cement volume rose 11 per cent to 0.61 mt. Higher grey-cement prices and improved white-cement and putty realisations, following lower competing imports from the UAE, lifted blended net sales realisation 6.8 per cent quarter on quarter to Rs 6,099 per tonne.

Profitability and Operating Metrics

Profitability remained under pressure. Consolidated EBITDA declined 5.8 per cent year on year to Rs 6,477 million, although it was 4.3 per cent above the broker estimate. EBITDA per tonne was Rs 980, down 19.9 per cent year on year and 2.2 per cent quarter on quarter, but broadly in line with the Rs 977 per tonne estimate.

Higher maintenance, packing, raw-material and other operating costs offset the benefits from a better fuel mix and stable freight. Consolidated PAT fell 14.5 per cent year on year to Rs 2,775 million, 7.1 per cent ahead of estimate.

Cement and clinker capacity utilisation stood at 75 per cent and 76 per cent, respectively, versus 82 per cent and 93 per cent in Q4 FY26. Trade share was 69 per cent, premium-product share was 18 per cent, and blended-cement share increased to 67 per cent.

Demand, Pricing and Cost Outlook

Management maintained FY27 grey-cement volume guidance of 22.5-23 mt, subject to demand conditions. Central India is driving growth and market-share gains, while growth in the North and South is constrained by capacity availability.

Cement prices were broadly flat versus the Q1 FY27 average, and management did not expect meaningful monsoon price corrections given industry cost pressure. However, costs are expected to rise by about Rs 150 per tonne quarter on quarter in Q2 FY27, largely from roughly Rs 100 per tonne of fuel inflation, diesel costs and operating deleverage. Fuel costs are expected to peak in Q2 FY27 before moderating.

UAE operations remained disrupted during H1 FY27, with white-cement volumes down around 50 per cent and exports restricted to GCC countries. Some competing UAE imports resumed in Q2 FY27, albeit below normal levels.

Expansion and New Business Initiatives

Expansion remains central to the broker thesis. The 7 mtpa North India project, comprising Jaisalmer clinker and grinding capacity plus Bikaner and Punjab grinding units, is progressing towards H1 FY28 commissioning.

• FY27 capex guidance is Rs 35-40 billion.
• FY28 capex guidance is Rs 12 billion.
• The guidance excludes further expansion towards 50 mtpa by FY30E.

The Mahan coal block is expected to start production by end-FY28, followed by the second block about a year later. These blocks could potentially lower fuel costs, reduce dependence on imported fuel and allow the sale of surplus coal.

Paints achieved EBITDA breakeven in Q1 FY27 on Rs 125 crore of revenue. Management guides for Rs 500-550 crore of FY27 revenue and full-year breakeven. The RMC network is planned to expand from 17 plants to 50 by FY27-end and 100 by FY28-end.

Earnings Estimates and Valuation

Prabhudas Lilladher forecasts FY26-28E EBITDA and volume CAGR of 24 per cent and 14 per cent, respectively. The broker made modest estimate revisions, increasing FY27E and FY28E sales estimates by 1.1 per cent and 1.0 per cent, respectively, while decreasing EBITDA estimates by 0.1 per cent and 0.3 per cent.

The target price is based on 15 times March 2028E EV/EBITDA of Rs 36,746 million, less estimated net debt of Rs 71,710 million, resulting in an equity value of Rs 6,205 per share.

Key Variables and Risks

• Delivery of capacity ramp-up and expansion.
• Demand and pricing resilience.
• Fuel and diesel costs.
• Restoration of white-cement trade conditions.