Buy JK Cement; target of Rs 8,500: ICICI Securities

ICICI Securitie`s research report on JK Cement

JK Cement (JKCE) has embarked on an express growth track, offering strong visibility of 16% CAGR capacity creation over FY25- 30 (vs. FY15–25’s 9%). JKCE has a rather cogent roadmap to achieve its 50mtpa target by 2030. First off, it recently announced a 7mtpa project in Jaisalmer which, in conjunction with projects in-hand, should catapult capacity to 38mtpa by Q2FY28 (24mtpa in FY25). Complementing this, the low-hanging brownfield expansion potential (to add 12mtpa) shall make the remaining job that much easier while increased cashflow may support project execution simultaneously. This setting is reminiscent of Shree Cement (SRCM), which in its high-growth years (FY14–18) commanded premium valuation of an average 22x EV/EBITDA.

Outlook

JKCE is set to tread a robust growth path with low-cost expansions guarding its industry-superior RoE along the way. Jaisalmer’s greenfield project is pegged to cost a mere USD 78/t (special incentive package to boost returns further); other brownfield expansions should cost USD 60/t. The clear path to high-quality growth is reminiscent of SRCM, which in its high-growth years commanded a valuation multiple of 22x EV/EBITDA. Drawing confidence from JKCE’s proven project execution prowess, its robust volume ramp-up, and disciplined approach to leverage, we now value the stock at 22x FY27E EV/EBITDA (being SRCM’s FY14–18 average). Upgrade to BUY.

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