JK Cement capacity expansion and market share gains underpin volume growth

Investment View and Valuation

In its October 13, 2026 company update, Motilal Oswal Financial Services Limited reiterated its BUY rating on JK Cement. The positive thesis is based on aggressive capacity expansion, market-share gains and strong cement volume momentum. Elevated fuel costs and higher leverage during the capex cycle remain near-term concerns.

The target price of Rs 5,960 is based on valuing JK Cement at 17 times FY28E EV/EBITDA.

Capacity Expansion and Market Position

JK Cement is targeting grey cement capacity of 40 million tonnes per annum by FY28 and 50 million tonnes per annum by FY30, compared with 32.3 million tonnes per annum currently.

The ongoing 7 million tonnes per annum Northern expansion is expected to be commissioned in the first half of FY28. It comprises a 4 million tonnes per annum clinker and 3 million tonnes per annum grinding integrated plant at Jaisalmer, along with 2 million tonnes per annum split grinding units at Bikaner and Punjab. The company is also planning an additional 10 million tonnes per annum of grinding capacity.

Medium-term projects include Muddapur line 2 and Maharashtra split grinding units, followed by Panna line III and additional split grinding units. The 3 million tonnes per annum Buxar grinding unit is expected to improve access to Bihar and adjoining eastern markets. The 60% acquisition of Saifco adds 0.42 million tonnes per annum in Jammu and Kashmir.

JK Cement commissioned a 0.6 million tonnes per annum wall putty plant in Rajasthan during 2QFY27, taking combined white cement and wall putty capacity to 3.65 million tonnes per annum.

Volume Growth and Financial Outlook

Actual FY26 grey cement volume increased about 15% year on year to 20.66 million tonnes, ahead of industry demand growth of about 7% to 8%. Capacity utilisation was about 79%, compared with roughly 74% for the industry.

Motilal Oswal attributes the outperformance to expansion, timely ramp-up of new plants and market-share gains in Central India, alongside maintained positions in North and South India. Management expects supportive demand and is targeting double-digit volume growth in FY27.

Motilal Oswal estimates consolidated volume CAGR of about 16% over FY26–28, with revenue, EBITDA and adjusted PAT CAGR of 17%, 14% and 7%, respectively.

Cost Inflation and Profitability Monitorables

Cost inflation remains the principal monitorable. The broker expects operating cost per tonne to rise about 4% year on year and quarter on quarter in 2QFY27E, driven by higher variable and freight costs. It estimates a sequential profitability decline of Rs 150 per tonne.

Structural levers are expected to partly offset the pressure. Green power represented about 54% of energy requirements in June 2026, compared with about 52% in FY26, and JK Cement is targeting about 75% by FY30. The company also targets thermal substitution of about 35% by FY30, compared with about 12% in FY26.

Motilal Oswal estimates operating margin of about 15% to 16% in FY27–28, versus about 17% in FY26. EBITDA per tonne is estimated at Rs 924 in FY27E and Rs 990 in FY28E, compared with Rs 1,017 in FY26.

The broker lowered its FY27E and FY28E EBITDA estimates by about 7% and 6%, respectively, in its 2QFY27 preview because of persistently high fuel prices. Cement price increases that recover the cost pressure would represent an upside risk to estimates.

Adjacent Building-Material Businesses

JK Cement is expanding its adjacent building-material businesses. The paints business reported revenue of Rs 125 crore and EBITDA break-even in 1QFY27. Management is targeting FY27 revenue of Rs 500–550 crore and an EBITDA margin of about 5% to 7% in FY28.

The RMC business had 17 plants and is targeting more than 50 plants by FY27-end and over 100 by FY28. Management targets FY27 RMC revenue of Rs 250–300 crore, although it views RMC primarily as a strategic downstream offering rather than a high-margin business.

Capex, Leverage and Key Risks

JK Cement plans investment of Rs 3,500–4,000 crore in FY27 and Rs 2,000–2,500 crore in FY28. Motilal Oswal estimates cumulative operating cash flow of Rs 5,010 crore against capex of Rs 6,200 crore during FY27–28.

Consequently, net debt is forecast to increase to Rs 8,190 crore by FY28 from Rs 5,570 crore in FY26. Net debt to EBITDA is forecast to rise to 2.6 times from 2.3 times.

The key risks to the thesis are:

• Sustained fuel and freight inflation.
• Inability to pass higher costs through pricing.
• The balance-sheet impact of the heavy capex cycle.