Key Takeaways
- You could capture a ~20% upside if JK Cement hits its FY28 target of INR 6,780.
- Volume growth is projected at 13% CAGR (FY26‑28) driven by 6 mtpa grey‑cement capacity in North & Central India.
- Margin pressure is temporary; utilization is expected to stay above 75% in FY27‑28.
- JK Cement’s EV/EBITDA of 17x FY28E is below peer averages, hinting at valuation headroom.
- Execution risk is the only real wildcard – watch commissioning timelines.
You’ve been watching JK Cement’s dip—time to see why it could be your next breakout.
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Why JK Cement’s Margin Squeeze Doesn’t Spell Disaster
Motilal Oswal’s latest note flags a short‑term margin dip, but the underlying fundamentals are solid. The cement industry’s input cost cycle—primarily energy and raw material prices—has been volatile. JK Cement’s gross margin compression reflects higher coal and power tariffs, a factor that is symmetric across the sector. However, the firm’s disciplined cost‑control measures, such as fuel‑efficiency upgrades at its plants, are already narrowing the gap.
Crucially, margins are a leading indicator, while volume is a lagging, more reliable driver of earnings. JK Cement’s volume growth remains robust, a signal that demand fundamentals outweigh transient cost pressures.
How North & Central Region Demand Fuels Volume Growth
The North and Central zones account for roughly 55% of India’s cement consumption. Infrastructure pipelines—highways, metros, and affordable housing—are slated to receive over INR 1.5 trillion in government spending through FY28. This macro backdrop translates into a structural demand tailwind for JK Cement, which has strategically placed its newest 6 mtpa grey‑cement line in Bihar and neighboring states.
Motilal Oswal estimates utilization of +80% in FY27 and +75% in FY28 for these regions, despite a wave of capacity additions from rivals. The key is timing: JK Cement has already commissioned its expansion, whereas competitors like UltraTech and ACC are still navigating permitting delays. Early movers capture market share, and JK Cement is already reporting a 1.5‑point gain in share in the Central belt.
JK Cement vs. Peers: Capacity Expansion and Utilization Edge
Let’s benchmark the firm against its peers:
- UltraTech Cement: Planning 7 mtpa addition, but only 60% of plants are operational as of Q4 FY26.
- ACC Limited: Aggressive 5 mtpa push, yet faces logistics bottlenecks in the north.
- JK Cement: 6 mtpa already online, with utilization projected above 75%.
The execution gap creates a near‑term supply‑demand imbalance favoring JK Cement, allowing it to price‑set and improve EBITDA margins once the initial cost shock subsides.
Historical Patterns: Cement Cycles and What They Teach Us
Indian cement has historically moved in 4‑year cycles: a buildup phase (capacity expansion), a peak (demand‑driven price rally), a softening (oversupply), and a consolidation (price correction). The last major cycle peaked in FY22‑23 when capacity grew 8% YoY. Those firms that completed projects on schedule—like Dalmia Bharat—emerged with higher market share and pricing power.
JK Cement’s current trajectory mirrors the “buildup‑to‑peak” phase. By FY27 the market is expected to absorb most of the new capacity, but JK’s early‑bird advantage positions it on the upside of the peak rather than the trough.
Technical Snapshot: Valuation Multiples and What 17x EV/EBITDA Means
Motilal Oswal applies a 17x FY28E EV/EBITDA multiple to arrive at an INR 6,780 target price—roughly 20% above the current level. For context, the sector average EV/EBITDA hovers around 19‑20x, reflecting a modest discount.
Why does the discount matter? A lower multiple suggests investors are pricing in execution risk, not fundamentals. If JK Cement meets its utilization and volume forecasts, the multiple could compress toward the sector norm, unlocking upside beyond the price target.
Investor Playbook: Bull vs. Bear Cases
Bull Case: Full execution of the 6 mtpa plant, utilization >75%, EBITDA margin expansion of 150 bps YoY, multiple re‑rating to 19x → 30% upside.
Bear Case: Delayed commissioning, utilization slips below 65%, margin pressure persists, multiple contracts to 15x → 10% downside.
Given the current risk‑reward profile, a moderate position with a stop‑loss near INR 5,200 aligns with the BUY rating while preserving capital for potential volatility.
Stay vigilant on plant‑commissioning updates and macro‑policy signals in the housing & infrastructure space. JK Cement could be the quiet catalyst in your cement‑focused portfolio.