Ambuja Cement, JK Cement Are Dolat Capital's Top Picks In Cement Space; Q2 Results Review

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

Dolat Capital Report

In Q2 FY26, our cement sector coverage universe reported revenue growth of 17.9% YoY (-9.0% QoQ) to Rs 498.8 billion, led by +11.9% YoY volume growth (-8.5% YoY QoQ) to 90.1mt coupled with +5.4% YoY (-0.5% QoQ) increase in blended realization/tn to Rs5,534.

Ebitda grew +55.9% YoY/-24.8% QoQ to Rs 84.2 billion and blended Ebitda/tonne declined by 17.7% QoQ (+39.2% YoY) to Rs 934, primarily due to +3.9% QoQ (+0.4% YoY) in opex/tn coupled with - 0.5% QoQ (+5.4% YoY) in blended realization/tn. APAT increased by 85.1% YoY to Rs 25.2 billion.

Top Picks

JK Cement

JK Cement Ltd. has delivered the leading industry volume CAGR of >16% over FY20-25, which is likely to grow at a higher than industry volume CAGR of 10.3% over FY25-28E. The current grey cement capacity stands at 26.26mtpa with further expansion plans of 4mtpa clinker/1mtpa cement expansion at Panna and 1mtpa cement at Hamirpur on track for Dec’25 commissioning, 3mtpa split GU at Bihar on track for commissioning by Jan-Feb'26.

Post these expansions, the company's total grey cement capacity will increase from 26.26mtpa currently to 31.26mtpa by FY26.

In the next phase of expansion, JK Cement plans to add 4mtpa clinker/ 7mtpa cement capacity to be completed for Q2 FY28E, taking total capacity to expand to 38.36 mtpa by Q2 FY28E.

These expansions will support FY26E/FY27E/ FY28E volume growth in our view.

As per the Q1 FY26 call, the company targets to reach 50mtpa by FY30E.

These expansions are likely to be funded through internal accruals with minimal increase in net debt.

Along with expansion, the company is also focusing on cost/tn reduction of Rs 150-200/tonne over the next 2-3 years.

For FY26, JK Cement aims to achieve cost savings of Rs 75–90/tonne and rest Rs 75-80/tn in FY27E.

JK Cement also has exposure in white cement and putty in the domestic as well as international markets. The company also operates the Paints business, wherein JK Cement expects a ramp up in revenue in FY26E/FY27E, along with Ebitda breakeven expected in FY27E.

We expect improvement in Ebitda/tn from Rs 1003/Rs 890 in FY25/Q2 FY26 to Rs 1,084/Rs 1,157/Rs1,239 in FY26E/FY27E/FY28E.

Accordingly, we recommend ‘Accumulate’ rating with target price of Rs 7,091 based on 17.5x consolidated FY27E EV/Ebitda + 50% FY27E CWIP.

Ambuja Cement

Ambuja Cement Ltd. is likely to deliver volume growth higher than the industry volume CAGR of 10.3% over FY25-28E supported by capacity additions.

In Q2 FY26, the company increased market share by ~1% to 16.6% in Q2 FY26 vs 15.5% in Q1 FY26; targets to increase market share to 20-22% by FY28E.

At present, Adani's (Ambuja + ACC + Sanghi + Penna + Orient) current total cement capacity stands at 106.8mtpa (of which North / Central /West /South /East accounts for 18%/8%/23%/28%/23%) and Ambuja Cement targets to reach ~118 mtpa/130-135 mtpa/155 mtpa (vs earlier 140 mtpa) in FY26E/FY27E/FY28E.

Clinker capacity to expand from 65mtpa currently to 73 mtpa /81 mtpa/96mtpa by FY26E/FY27E/FY28E; this will support the cement capacity additions.

Along with aggressive capacity addition targets to support volume growth, Ambuja Cement also maintains its cost reduction target to reach Ebitda/tn of Rs 1,500 by FY28E.

Ambuja Cement targets total cost reduction/tn of Rs 4,000/Rs 3,800/ Rs 3,600-3,650 by exit of Mar'26/Mar'27/Mar'28 from current ~Rs4,200 at 5% reduction rate/year led by improved efficiencies and higher operating leverage, reduced lead distance and higher share of green power.

Raw material/Power and fuel/logistics/other overheads cost to reduce by ~Rs 50/~Rs 200/ ~Rs 100/~Rs 50 over Mar'26 exit to Mar'28 exit.

The company plans to achieve this through higher share of coal consumption, benefit of withdrawal of GST on coal cess, reduction in lead distance of ~50 km, increase in share of sea logistics to 5%, increase in green power share to 60%, reduction in power cost from Rs6/Kwh to Rs 4.5/Kwh, long term tie ups for flyash/slag and improved operational efficiencies through use of latest technology.

Ambuja Cement will also benefit from synergy gains from the merger with Penna/Sanghi, as these subsidiaries also move towards 4-digit Ebitda/tn.

Accordingly, we recommend ‘Accumulate’ rating with target price of Rs 683 based on 15.5x consolidated FY28E EV/Ebitda + 50% FY28E CWIP.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.