JK Cement, Best-Placed Midcap Cement Company With A Pan-India Presence, Says Motilal Oswal Maintaining 'Buy'

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We estimate JK Cement Ltd.'s consolidated revenue/Ebitda/PAT CAGR at 15%/21%/33% over FY25-27, driven by robust volume growth and profitability improvement. We anticipate the company’s consol. volume to report ~13% CAGR over FY25-27 and operating profit margin to expand 1.7pp to ~18% by FY27.

We estimate its Ebitda/tonne at Rs 1,070/ Rs 1,120 in FY26/FY27 versus Rs 980 in FY25 (average Rs 1,070 over FY20-25).

We estimate JK Cement to generate a cumulative operating cash flow of Rs 63.6 billion over FY25-27, with cumulative capex expected to be Rs 52.0 billion over the same period. Given the strong cash flow generation and low-cost expansions (capex cost stood at $60-70/tonne), we believe its net debt will peak out in FY26E at Rs 45.0 billion.

Further, we anticipate its RoE/RoCE (post tax) to improve to 18%/14% in FY27 from 13%/10% in FY25E.

JK Cement re-rated in FY21 and has been trading in the range of 12-20x EV/Ebitda (one-year forward). The re-rating is attributed to the company’s expanded operations, strong execution capabilities, and cost reduction initiatives.

We believe JK Cement is best-placed among mid-sized cement companies with a pan-India presence.

We value JK Cement at 16x FY27E EV/Ebitda (similar to its five-year average one-year forward EV/Ebitda) to arrive at our target price of Rs 6,000. We reiterate our Buy rating on the stock.

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