Buy J K Cement; target of Rs 7000: Motilal Oswal

Motilal Oswal's research report on J K Cement

JK Cement’s (JKCE) 2QFY26 earnings were in line with our estimates, with EBITDA growing ~57% YoY to INR4.5b. EBITDA/t surged ~37% YoY to INR894 (vs. est. INR934). OPM expanded 3.7pp YoY to ~15% (vs. ~16% est.). Adj. PAT surged 4.5x YoY to INR1.6b (in line), albeit on a low base. Management highlighted that volume growth in 2Q was led by the central and south markets, while the north region remained flat. Cement prices remain under pressure in the current month; however, this is expected to ease going forward. Further, the company intends to pass on any future cost increases through price adjustments. JKCE is targeting cost savings of INR150-200/t, with INR75-90/t expected in FY26/FY27 (each). The 6mtpa capacity expansion is at an advanced stage and is expected to be commissioned in the coming months. Following the announcement of the Jaisalmer greenfield expansion during the quarter, capex guidance for FY26 has been raised to INR28b (earlier estimated INR20b).

Outlook

We estimate RoE at ~18-19% and ROCE at ~12% in FY27-28. The stock trades at 16x/14x FY27E/FY28E EV/EBITDA. We value JKCE at 18x Sep’27E EV/EBITDA (at a premium to its long-term average) to arrive at our revised TP of INR7,000. Reiterate BUY.