JK Cement capacity expansion and green power support long-term earnings visibility

Investment View and Target Price

Choice Institutional Equities maintained its BUY rating on JK Cement Limited and retained its one-year forward target price of Rs 7,000 per share in its July 20, 2026 Q1 FY27 result update. The broker's positive view is supported by continued market-share gains in Central India following capacity additions, management's double-digit volume-growth target for FY27E and the company's pathway towards approximately 50 MTPA of grey cement capacity by FY30E.

Choice expects structural margin improvement from greater penetration of green power and increased use of alternative fuel and raw materials. A stable cement-pricing environment should also partly absorb fuel-cost pressure.

Q1 FY27 Financial Performance

JK Cement reported consolidated Q1 FY27 revenue of Rs 40,317 million, an increase of 20.3 per cent year on year and 3.7 per cent quarter on quarter, and ahead of Choice's estimate of Rs 37,012 million. EBITDA declined 5.8 per cent year on year and 5.1 per cent quarter on quarter to Rs 6,477 million, but exceeded the broker's estimate of Rs 6,153 million.

Sales volume increased 18.0 per cent year on year to 6.6 million tonnes, while realisation rose 1.9 per cent year on year and 6.5 per cent sequentially to Rs 6,090 per tonne. However, total cost per tonne increased 7.6 per cent year on year and 8.5 per cent sequentially to Rs 5,112. This reduced EBITDA per tonne by about Rs 247 year on year to Rs 978. EBITDA margin declined 445 basis points year on year to 16.1 per cent.

Operating Performance and Capacity Expansion

Grey cement volume grew 18 per cent year on year to 5.96 million tonnes, while white cement volume increased 29 per cent to 0.54 million tonnes in Q1 FY27. Cement capacity utilisation was 75 per cent and clinker utilisation was 76 per cent. Premium products accounted for 18 per cent of trade sales.

As of Q1 FY27, JK Cement had grey cement capacity of 32.3 MTPA and white cement and wall-putty capacity of 3.1 MTPA. The company also operated 17 ready-mix concrete plants and had a distribution network of approximately 91,000 dealers and retailers.

Management plans capital expenditure of Rs 50,000 million to Rs 60,000 million over the next two years. Key projects include a 7 MTPA grey-cement expansion across Jaisalmer, Bikaner and Bhatinda in North India, and a 6 lakh tonne wall-putty plant at Nathdwara, which is expected to commission in Q2 FY27.

Paint Business, Resources and Balance Sheet

The paint business generated net revenue exceeding Rs 1,250 million. Management is targeting more than Rs 5,000 million of net revenue in FY27, EBITDA breakeven by Q1 FY27, a 7 per cent EBITDA margin and an additional Rs 1,500 million of revenue in FY28.

JK Cement has approximately 900 million tonnes of limestone reserves and 96 million tonnes of coal reserves. Green-power capacity stands at 342.3 MW, including 223 MW of captive solar and wind capacity and 119.3 MWh from waste-heat recovery. As of June 30, 2026, net debt to EBITDA was 1.69 times and net debt to equity was 0.53 times.

Estimates and Earnings Outlook

Choice has incorporated an incremental Rs 150 per tonne cost increase in Q2 FY27E. This comprises approximately Rs 100 per tonne of fuel inflation in line with management guidance and Rs 50 per tonne of higher other operating costs, partly offset by lower packaging expense.

The broker estimates that FY27E total cost per tonne will increase by approximately Rs 130, while forecasting EBITDA per tonne of Rs 1,053. Volume growth is projected at 7.0 per cent in FY27E, 8.0 per cent in FY28E and 10.0 per cent in FY29E. Realisation growth is forecast at 3.0 per cent, 0.5 per cent and 0.5 per cent, respectively.

Choice forecasts EBITDA CAGR of 13.5 per cent over FY26 to FY29E, with EBITDA margin expanding from 17.3 per cent in FY26 to 19.1 per cent in FY29E. Following the better-than-expected Q1 performance, the broker raised its FY27E and FY28E EBITDA estimates by 1.7 per cent and 2.0 per cent, respectively. FY27E and FY28E PAT estimates were increased by 3.0 per cent and 2.3 per cent, respectively.

Valuation and Key Risks

The target price of Rs 7,000 per share is derived using a 3.6 times FY28E EV/CE multiple.

• Near-term risks include elevated fuel and operating-cost pressure.
• The investment case depends on stable cement pricing, planned capacity additions, improving utilisation and the successful execution of cost-reduction initiatives.