Shares of recently-listed JSW Cement are higher by over 3 percent on August 19, with brokerage Motilal Oswal initiating coverage with a 'Neutral' rating with a target price of Rs 163 per share, calling the stock 'fairly valued'.
The note projects an FY26 profit of around Rs 300 crore for JSW Cement, with a revenue CAGR of 19 percent over FY25-28, and EBITDA CAGR of 31 percent for the same period.
Unlike other cement players that have dominance in the grey cement category, JSW Cement has a higher concentration of revenue and profit from ground granulated blast furnace slag (GGBS), which is manufactured from slag, and is a byproduct of the steel-making process. Leveraging JSW Group’s presence in steel manufacturing, JSW Cement has emerged as the largest manufacturer of GGBS in India with a market share of close to 84 percent. Motilal Oswal said JSW Cement is 'well-positioned' to capitalize on the rising demand for GGBS, and is supported by long-term supply agreements for blast furnace slag.
According to the MOSL note, GGBS made up around 34 percent of JSW Cement's total revenue for FY25, and its share in EBITDA was higher at 76 percent for FY25.
The ongoing expansion plans at JSW Cement will soon see the company foray into the North region, where MOSL said profitability is 'better' compared to South India. "It will also help JSW Cement reduce its capacity concentration in the South region to around 41 percent by FY28e from around 53 percent in FY25," said MOSL. However, this capex will keep the debt levels at JSW Cement elevated, said the note.
"We estimate a capex of Rs 5,600 crore during FY26-28e, which would be mainly for the Rajasthan integrated unit. The remaining capex will be used for a grinding unit of Shiva Cement, a greenfield unit in Punjab and brownfield capacity expansion in the south region," MOSL said.
JSW Cement could see an improvement in its clinker-to-cement conversion for existing plants, along with higher-than-estimated GGBS volumes and better utilization for the North India plant, said MOSL, while pointing at a downside risk of lower trade volume, pricing pressure in South and delays in capacity commissioning in North India.
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