Motilal Oswal Financial Services has issued a BUY recommendation on JK Cement, underlining the company’s robust operational execution and ambitious expansion agenda. The brokerage projects a target price of Rs 7,300, reflecting a 14% upside from current levels. This research note dissects JK Cement’s financial trajectory, strategic initiatives, and market positioning, while highlighting key valuation metrics and risk factors. Investors are advised to take note of the company’s aggressive capacity expansion, prudent cost management, and strengthening pan-India presence, all of which underpin a compelling growth narrative for the next several years.

Motilal Oswal Reiterates BUY: Target Price Set at Rs 7,300

Motilal Oswal Financial Services has reaffirmed its bullish stance on JK Cement, setting a target price of Rs 7,300 per share, which implies a 14% upside from the current market price of Rs 6,393. The brokerage’s conviction is anchored in JK Cement’s consistent operational delivery, disciplined project execution, and a clear roadmap for capacity augmentation. The recommendation is underpinned by robust financial projections and an expectation of superior shareholder returns over the medium term.

Strategic Expansion: Building Capacity for Long-Term Growth

JK Cement is poised to expand its installed capacity to 50 million tonnes per annum (mtpa) by FY30, leveraging both greenfield and brownfield projects in strategic locations such as Jaisalmer, Muddapur, and Panna. The company’s recent 40-year limestone supply pact with Gujarat Mineral Development Corporation, securing access to 250mt of reserves, and the allocation of two coal blocks for fuel security, underscore its long-term resource planning. The Eastern India foray, marked by the Buxar plant launch, positions JK Cement to tap into high-growth regions and solidify its pan-India aspirations.

Operational Excellence: Cost Management and Digitalization

Operational efficiency remains a cornerstone of JK Cement’s strategy, with targeted cost savings of Rs 75 per tonne over the coming quarters, following Rs 40-50 per tonne savings realized in FY25. The company is aggressively increasing the share of blended cement, expanding its green energy footprint, and deploying digitalization and automation to drive productivity. These initiatives are expected to elevate JK Cement into the top quartile of sustainable, low-cost cement producers in India.

Financial Performance: Strong Growth Trajectory

Motilal Oswal estimates a consolidated revenue, EBITDA, and PAT CAGR of 13%, 20%, and 31%, respectively, over FY25-28, propelled by a 12% volume CAGR and improving profitability. The brokerage forecasts EBITDA per tonne to rise from Rs 1,010 in FY25 to Rs 1,280 by FY28, with operating margins improving to 20-21% by FY27-28. The company’s return on equity (RoE) and return on capital employed (RoCE) are projected to climb to 19% and 14%, respectively, by FY28.

Balance Sheet Strength: Cash Flows and Deleveraging

JK Cement is expected to generate cumulative operating cash flows of Rs 81 billion during FY26-28, with cumulative capex of Rs 48 billion over the same period. Net debt is forecasted to peak at Rs 42 billion in FY26 before declining, with the net debt-to-EBITDA ratio anticipated to fall below 1.0x by FY28, down from 2.0x in FY25. This deleveraging, combined with robust free cash flow generation, provides ample headroom for future expansion and shareholder returns.

Valuation and Stock Levels: Attractive Entry Point

JK Cement currently trades at 19x and 16x FY26 and FY27 estimated EV/EBITDA, with an EV/tonne of USD 185 and USD 180, respectively. Motilal Oswal’s valuation is based on 18x June 2027E EV/EBITDA, a premium to the company’s long-term average, reflecting confidence in its growth prospects and execution capability. The stock has a 52-week range of Rs 6,514 to Rs 3,891, and the brokerage’s target price of Rs 7,300 offers a 14% upside from current levels.

Market Dynamics: Navigating Short-Term Headwinds

Despite a sluggish start to FY26 due to adverse weather and muted construction activity, JK Cement is expected to deliver 8% YoY volume growth in 1QFY26, driven by market share gains and improved realizations. The company’s exposure to resilient North and Central markets, which comprise 80% of its grinding capacity, is expected to provide a buffer against near-term demand volatility. Medium- to long-term demand drivers remain intact, supporting a positive outlook for cement pricing and profitability.

ESG and Sustainability: Green Energy and Emission Reduction

JK Cement is intensifying its sustainability efforts, targeting a 22% reduction in CO2 emissions from FY20 levels and aiming for a green energy share of 60% by FY30. The company’s investment in waste heat recovery systems, solar, and wind power not only reduces operational costs but also aligns with global ESG standards, enhancing its appeal to environmentally conscious investors.

Shareholding Pattern and Investor Takeaways

As of March 2025, promoters held 45.7% of the equity, with domestic institutional investors (DIIs) at 24.5% and foreign institutional investors (FIIs) at 16.1%. The steady institutional interest underscores confidence in JK Cement’s management and business model.

Key Risks and Considerations

Potential risks include a prolonged demand slowdown, execution delays in capacity expansion, and input cost volatility. However, Motilal Oswal believes JK Cement’s diversified capacity, prudent capital allocation, and operational agility position it well to navigate these challenges.

A Compelling Long-Term Bet in Cement Sector

Motilal Oswal’s BUY call on JK Cement is predicated on its superior execution, aggressive yet disciplined expansion, and improving financial metrics. With a target price of Rs 7,300 and multiple levers for value creation, JK Cement stands out as a compelling investment for those seeking exposure to India’s infrastructure and construction growth story. Investors are encouraged to accumulate the stock at current levels, with an eye on long-term wealth creation.