JSW Cement Rated 'Neutral' By Goldman Sachs On Coverage Initiation — Here's Why Caution Is Advised

Goldman Sachs has initiated coverage on JSW Cement with a "Neutral" rating, setting a target price of Rs 147. This target price implies a potential downside of 1.5% from the current market price of Rs 149.30.

The firm’s cautious stance is based on the challenges JSW Cement faces in balancing aggressive growth with profitability and leverage. This comes into the picture, especially in an industry dominated by large, debt-free players like Ultratech and Ambuja Cement.

The analyst highlights several key differentiating factors for JSW Cement that could drive future growth. The company holds a majority of 76% market share in ground granulated blast-furnace slag, or GGBS, as of fiscal 2025. The company holds a major market share for the eco-friendly construction material.

JSW Cement is also noted as the "greenest" cement producer in India and benefits from strategic advantages provided by its parent group's operations in steel, power, paints, and infrastructure, which provide an edge in sourcing slag and power.

Goldman Sachs projects a 20% revenue compound annual growth rate, or CAGR, for JSW Cement from fiscal year 2025 to fiscal year 2028, driven by a 17% volume growth.

This includes a 19% growth in cement and 13% in GGBS. The firm also forecasts a 38% Ebitda CAGR over the same period, attributing this to an increase in green power usage and a low base year for profitability.

However, the brokerage cautions that the company's notable capacity expansion plans will likely keep its net debt-to-Ebitda ratio above 2x in fiscal year 2028.

The brokerage outlines several risks to its outlook as well. Upside risks include a faster-than-expected growth in the GGBS market and improved profitability and cash flows that could help manage debt.

On the other side, downside risks are significant delays in greenfield expansion approvals, a reliance on JSW Steel for slag supply, and a potential slowdown in market demand.