Buy JK Cement; target of Rs 1371: Edelweiss

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26 Aug, 2025 12:21

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JK Cement’s (JKCE) recently announced 4.2mtpa capex is well timed as it imparts much-needed growth visibility to its North operations where clinker utilisations are already at ~85% (implying limited scope for volume growth beyond FY20). Moreover, expansion on home turf has added advantage of easy volume acceptability in the market and lead distance optimisation. Even though JKCE is yet to finalise capex funding mix, we see little cause for concern over potential equity dilution (if any). Our scenario analysis assuming ~7-9% equity dilution (~INR5-7bn fund raise) indicates no major change in target price and EPS.

While net debt rise is imminent (irrespective of funding mix), we believe the rock-steady white segment entails potential to cushion against any volatility in grey cement. With superior RoE, we value JKCE at 11x FY20E EV/EBITDA and maintain ‘BUY’ with TP of INR1,371.

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