JK Cement To Maintain High Margin Over 2-3 Years: Go India Stocks' Rakesh Arora

JK Cement Ltd. will continue to enjoy high Ebitda margins over the next 2-3 years, according to Rakesh Arora, founder of Go India Stocks.

The company has displayed strong growth trajectory as it inches closer to doubling its capacity to 30 million tonnes by FY26, compared to the 2022 figures.

Speaking to NDTV Profit, Arora said JK Cement's target to reach 50 million tonnes in FY30 is achievable, but volumes won’t grow at the same pace.

“I think volume growth would be closer to 7–8% for them. Until they make some acquisitions to reach that 50-million tonne mark, they will not be able to grow at double digits. They might be able to put in the capacity, but you need three or four big plants to come in. That again, I doubt, because they aren't really prepared for that as yet,” he said.

Arora also listed three key reasons why JK Cement is preferable among its peers. Beyond its capacity expansion, the company is present in strategic regions with high cement prices and limited limestone availability. Moreover, it is also focused on broadening its product portfolio and growth avenues.

Arora highlighted JK Cement’s strategic shift beyond core cement into the broader building materials space as a key positive. The company, already in white cement and wall putty, is expanding into related categories like paints. He noted this diversification, along with focused branding efforts, has helped in narrowing the pricing gap with industry leaders.

“They've been able to spend on marketing and brand building, as they had to do in any case when they were launching all this, paints etc. So, they've been able to narrow down the differential to the leaders. And that is what is really showing up in their better Ebitda margins,” he added.

According to Arora, debt is not a concern for the company as they have a lot of cash in their books. On earnings growth, he expects Ebitda margins to rise from the current Rs 1,000 to around Rs 1,200 per tonne in FY26.

“Last year, the Ebitda margin was around Rs 1,000 per tonne. This year I'm expecting around Rs 1,200. Probably a 20% increase in Ebitda comes from just the margin expansion. And around 10% increase will come from their volume growth. So, you can expect around 30% of the margin growth for the company,” he explained.

On the sectoral outlook, Arora acknowledged that cement prices typically dip during monsoon due to a drop in demand and surplus capacity. However, he believes on a full-year basis, pricing is likely to remain elevated.

“Seasonal dips are definitely going to come because demand goes 20% below the yearly average. But having said that, if I look from a whole year as a perspective, the competition intensity in the industry is going down...You have the top two leaders, UltraTech and Ambuja, who are kind of settling down (after acquisitions) and want to increase the prices...I think cement is in for a good time...from a yearly perspective,” he added.