Motilal Oswal has noted that JK Cement has targeted to reach 40mtpa/50mtpa grey cement capacity by FY28/FY30- 31. The company's strong execution strategy is estimated to support double-digit volume growth over the medium term. However, elevated fuel prices are likely to exert near-term cost pressures (estimates a sequential decline in profitability by Rs 150/t in Q2 FY27).
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Motilal Oswal Report
Motilal Oswal has reiterated its Buy rating on the JK Cement Ltd. and value the stock at 17 times FY28E EV/Ebitda to arrive at a target price of Rs 5,960, implying a potential upside of up to 22% , from the reports cmp of Rs 4,888.
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At CMP, the stock is currently trading at 17x/15x FY27/FY28E EV/Ebitda.
Motilal Oswal highlighted that JK Cement has targeted to reach 40mtpa/50mtpa grey cement capacity by FY28/FY30- 31. The company's strong execution strategy is estimated to support double-digit volume growth over the medium term. However, elevated fuel prices are likely to exert near-term cost pressures (estimates a sequential decline in profitability by Rs 150/t in Q2 FY27).
Any price hikes to pass on the cost pressure may drive earnings upgrade. The brokerage anticipates the company's consolidated volumes to post ~16% CAGR over FY26-28.
Motilal Oswal estimates operating profit margin in the range of ~15-16% over FY27-28 due to cost pressure vs average at ~17% over FY24-26 and estimates its EBITDA/t at Rs 924/Rs 990 in FY27/FY28 vs Rs 1,017 in FY26.
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The brokerage estimate JK Cement to generate a cumulative operating cash flow of Rs 5,010 crore during FY27-28, with cumulative capex estimated at Rs 6,200 crore over the same period.
Given the heavy capex cycle, its net debt is estimated to surge to Rs 8,190 crore by FY28 vs Rs 5,570 crore in FY26. The company's net debt-to-Ebitda ratio is estimated to increase to 2.6x by FY28 vs 2.3x in FY26.
Motilal Oswal anticipates its RoE/RoCE (post tax) to remain largely stable at ~14%/10% by FY28.
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