JK Cement volume growth and expansion support earnings despite near-term cost pressures

Investment View and Valuation

Motilal Oswal Financial Services retained its Buy rating on J K Cement following a first-quarter FY27 performance in which EBITDA exceeded estimates, supported by stronger-than-expected volumes and white cement realisations. The broker raised its FY27E and FY28E EBITDA estimates by about 3 per cent each, reflecting lower cost guidance, and revised its target price to Rs 6,430 using a 17 times FY28E EV/EBITDA multiple.

The company’s volume growth and expansion programme support the earnings outlook, although near-term profitability is expected to face pressure from higher fuel and diesel costs.

1QFY27 Financial Performance

J K Cement reported consolidated 1QFY27 revenue of Rs 4,030 crore, up about 20 per cent year on year and 8 per cent above Motilal Oswal’s estimate. EBITDA declined about 6 per cent year on year to Rs 650 crore, but was approximately 7 per cent above the broker’s estimate. PAT declined about 14 per cent year on year to Rs 280 crore, while beating the estimate by about 13 per cent, aided by lower-than-estimated depreciation.

Volume Growth and Realisations

Sales volume grew about 18 per cent year on year, around 5 per cent ahead of the broker’s estimate. Grey cement volume increased about 19 per cent year on year, while white cement volume rose about 11 per cent.

Blended realisation increased about 2 per cent year on year and 7 per cent quarter on quarter to Rs 6,092 per tonne. Grey cement realisation rose 3 per cent year on year to Rs 5,069 per tonne, while white cement realisation increased 11 per cent to Rs 14,975 per tonne.

Cost per tonne rose about 8 per cent year on year because of higher variable costs, freight and other expenses. Employee expense per tonne declined about 1 per cent on operating leverage.

Market Position and Management Commentary

Management said grey cement growth was led by recently commissioned Central India capacity, including the Bihar grinding unit. J K Cement gained market share in most Central Indian markets while maintaining its share in North and South India. Plants in the North and South were operating at around 85–90 per cent utilisation.

Management reiterated its FY27E grey cement volume target of about 23 million tonnes and expects double-digit volume growth. Cement prices were described as broadly stable, with first-quarter price hikes sustained. Management does not expect a meaningful monsoon-related price decline because of industry-wide fuel-cost pressure.

Near-Term Cost Pressures

Management expects operating cost per tonne to rise by about Rs 150 in 2QFY27, comprising roughly Rs 100 from fuel and Rs 50 from diesel. Packaging cost, however, is expected to decline sequentially.

Major kiln maintenance was advanced into 1QFY27, resulting in around Rs 50 crore of additional maintenance expense. The shutdown did not affect volumes because clinker inventory was adequate, and maintenance expense is expected to be lower after the first quarter.

Fuel cost per kcal was Rs 1.53 in 1QFY27, while management expects it to peak near Rs 1.75 in 2QFY27, depending on the fuel mix. Supply disruption from UAE imports aided white cement and wall putty volumes in 1QFY27, although competitive intensity may normalise as supply improves.

Expansion and Green Energy Progress

J K Cement’s expansion programme remains on track, including the greenfield integrated project at Jaisalmer, which is targeted for commissioning in 1HFY28.

Green energy accounted for about 53.5 per cent of total energy needs in June 2026, compared with 52 per cent in FY26. The company is targeting approximately 75 per cent by FY30.

Financial Outlook

Motilal Oswal forecasts FY26–FY28 revenue, EBITDA and PAT compound annual growth of 16 per cent, 18 per cent and 13 per cent, respectively. Volume CAGR is estimated at about 15 per cent.

Net debt is estimated to rise to Rs 7,900 crore in FY28 from Rs 5,570 crore in FY26, with net debt to EBITDA reaching 2.4 times.