Motilal Oswal has reiterated its BUY rating on JK Cement with a target price of Rs 6,780, implying an upside of nearly 15 percent from the current market price of Rs 5,912. Over the past few months, the stock has lagged broader indices and key peers, weighed down by concerns over margin compression and aggressive capacity announcements in the North and Central regions. Yet beneath this near-term underperformance lies a structurally strengthening business—one executing expansions on schedule, gaining market share, and positioning itself to benefit from resilient infrastructure-led demand.

JK Cement's Quarterly Performance: Execution Over Noise

JK Cement’s recent stock weakness appears more cyclical than structural. While investor sentiment has been cautious amid capacity addition headlines, actual commissioning levels remain below initial industry announcements, moderating oversupply risks.

Key highlights:

~13% volume CAGR projected over FY26–28

EBITDA CAGR of ~17%; PAT CAGR of ~19%

EBITDA per tonne expected to rise from Rs 1,060 (FY26E) to Rs 1,140 (FY28E)

Capacity mix shifting further toward high-growth North and Central markets

Valued at 17x FY28E EV/EBITDA

The brokerage believes disciplined execution and regional dominance justify premium multiples.

Regional Demand Dynamics: Structural Tailwinds Remain Intact

The North and Central regions continue to benefit from sustained government infrastructure spending, urban housing growth, and redevelopment initiatives across Uttar Pradesh, Rajasthan, Madhya Pradesh, Haryana, and NCR.

Despite high headline capacity announcements:

North region commissioned only ~10 mtpa versus ~14 mtpa announced (FY26 YTD)

Central region commissioned ~8 mtpa versus ~15 mtpa planned

All-India additions stand at ~35 mtpa versus ~63 mtpa announced

This divergence tempers near-term oversupply concerns.

Utilization expectations:

North region: ~80% by FY27–28

Central region: ~75% by FY27–28

Higher utilization should support pricing stability and margin expansion.

Capacity Expansion: Timely Commissioning Strengthens Competitive Position

JK Cement has completed its Panna Phase-2 expansion on schedule, adding:

3.3 mtpa clinker

3.0 mtpa grinding capacity

3.0 mtpa greenfield unit in Bihar

Consolidated grey cement grinding capacity now stands at 31.8 mtpa.

The next leg of growth is anchored in Jaisalmer, Rajasthan:

4.0 mtpa clinker unit

3.0 mtpa grinding unit

Two split-location grinding units (2 mtpa each) in Bikaner and Bathinda

The Jaisalmer project is expected to be commissioned in 1HFY28, supported by long-term limestone reserves at competitive costs—securing raw material advantage and improving logistics efficiency across Rajasthan, Gujarat, Haryana, and Punjab.

By FY28, ~80% of overall grinding capacity will be concentrated in North and Central India, up from ~75% currently.

Volume and Profitability Outlook: Growth Accelerates

The brokerage forecasts robust expansion across financial metrics:

EBITDA per tonne trajectory:

FY26E: Rs 1,060

FY27E: Rs 1,107

FY28E: Rs 1,140

Operating margin expansion reflects improved realizations, operating leverage from higher volumes, and cost efficiencies from new integrated capacities.

Balance Sheet Discipline: Leverage Remains Controlled

JK Cement’s expansion is capital-intensive but financially manageable.

Cumulative operating cash flow (FY26–27): Rs 76.7 bn

Cumulative capex (FY26–27): Rs 75.0 bn

Net debt expected to peak at Rs 68.5 bn in FY27

Net debt/EBITDA projected below 2.5x

By FY28, net debt is expected to decline to Rs 58.9 bn, supported by incremental cash generation from newly commissioned capacities.

Return metrics remain superior to industry peers:

RoE projected at ~17% (FY28)

RoCE projected at ~11%

This places JK Cement among the stronger capital allocators in the sector.

Valuation Framework: Premium Justified by Execution

The stock currently trades at:

17.4x FY27E EV/EBITDA

15.0x FY28E EV/EBITDA

30.8x FY28E P/E

The brokerage values the company at 17x FY28E EV/EBITDA, deriving a target price of Rs 6,780.

Given:

Strong volume growth visibility

Margin recovery potential

Strategic limestone security

Dominant regional positioning

Superior return ratios

The valuation premium appears defensible relative to long-term growth prospects.

Investment Thesis: Structural Compounding Opportunity

The market’s recent concerns around capacity glut overlook a crucial reality—execution matters more than announcements. JK Cement has demonstrated:

Operational excellence through timely project delivery
Strategic foresight in securing long-life limestone reserves
Regional dominance in structurally high-demand markets
Financial discipline in maintaining leverage comfort

With ~13% volume CAGR and improving margins, the earnings compounding trajectory remains intact.

Motilal Oswal’s reaffirmed BUY rating signals confidence in JK Cement’s ability to navigate industry cycles while expanding intrinsic value.

Investor Takeaway

At Rs 5,912, the stock offers a calculated entry into a structurally growing regional leader. The target of Rs 6,780 implies a meaningful upside, supported by expanding capacity, rising utilizations, and earnings visibility through FY28.

For long-term investors seeking exposure to India’s infrastructure-led cement cycle, JK Cement represents a high-quality, execution-driven opportunity.

Investors should, however, monitor pricing trends, regional demand strength, fuel cost volatility, and execution timelines for the Jaisalmer project.