HDFC Sec says 'Buy' again on JK Lakshmi Cement; 5 drivers behind the call

HDFC Securities has reiterated its Buy rating on JK Lakshmi Cement, citing strong volume momentum driven by higher premium cement sales and rising contributions from newer markets such as Bihar, Jharkhand and eastern Uttar Pradesh.

 

Following interactions with the company’s management, the brokerage, while maintaining its bullish stance, has revised the target price to ₹1,080 per share, valuing the stock at 10 times FY28E consolidated earnings before interest, taxes, depreciation, and amortisation (Ebitda).

 

“The company is confident of growing faster than the industry, as demonstrated in H1FY26. The decline in cement prices, largely in the non-trade segment, in October 2025 is expected to weigh on net sales realisation and keep margins flat on a quarter-on-quarter basis in Q3FY26. However, the industry is likely to take price hikes in Q4FY26 to pass on higher fuel costs and recover recent price declines,” said HDFC Securities in its report.

 

While capex spending in Q3FY26 has been slower than earlier guidance for H2FY26, management, HDFC Securities said, remains confident that the ongoing eastern expansion is on track.

 

HDFC Securities estimates JK Lakshmi Cement will deliver a 10 per cent volume CAGR during FY25–FY28, with margins recovering to ₹986 per tonne in FY28E from ₹713 per tonne in FY25, driving an Ebitda CAGR of 22 per cent. Despite a 37 per cent capacity addition to 22.6 million tonnes over the period, net debt to Ebitda is expected to remain below 2 times, the brokerage said.

Here are top 5 drivers behind the bullish call on JK Lakshmi Cement Stock:

Volume momentum to sustain in H2FY26

In H1FY26, JK Lakshmi Cement reported 12 per cent year-on-year volume growth, nearly double the industry average. While demand was subdued in the early part of Q3FY26, the company is witnessing a recovery thereafter.

 

“JKLC’s volume growth momentum remains strong, led by premiumisation and increasing contribution from newer markets in Bihar, Jharkhand and eastern UP,” the brokerage noted.

Price decline to offset operating leverage gains in Q3FY26

Contrary to expectations of stable prices following the GST reduction, non-trade cement prices declined by ₹15–₹20 per bag, while the fall in trade prices was relatively modest.

 

“There is optimism that demand recovery in December will support price hikes. While Q3FY26 is likely to see disappointment on pricing and margins, both should improve in Q4FY26,” said HDFC Securities.

 

Fuel costs are expected to remain largely flat in Q3FY26 due to older low-cost inventory, with the impact of recent fuel price hikes—estimated at 5–10 per cent—likely to be felt in Q4FY26. As a result, margins are expected to remain largely flat sequentially in Q3FY26, as price pressures offset operating leverage gains.

Capex execution remains on track

JK Lakshmi Cement incurred ₹220 crore in capex in H1FY26 and had guided for an additional ₹800–₹1,000 crore in H2FY26, although the Q3FY26 run rate has been slower.

 

Despite this, management indicated that eastern expansion plans remain on schedule, with most key equipment already ordered.

 

“We expect consolidated capacity to rise to 22.6 million tonnes by FY28E. In the North East, the company has acquired most of the required land and received environmental clearance for one of the two limestone mines,” the brokerage said, adding that the project will be fast-tracked after the Durg expansion and resolution of ongoing litigation.

Focus on scaling non-core revenues

JK Lakshmi Cement’s non-core cement revenues, grouped under Smart Building Solutions (SBS), include ready-mix concrete, AAC blocks, putty and construction chemicals. In FY25, SBS accounted for 9 per cent of consolidated revenue and Ebitda.

 

The company, brokerage said, expects SBS revenues to double over the next three years, with margins remaining stable at 3–5 per cent, the brokerage said.

Estimates revised; long-term outlook intact

HDFC Securities has trimmed its FY26, FY27 and FY28 Ebitda estimates by 6 per cent, 3 per cent and 3 per cent, respectively, factoring in softer cement prices and higher fuel costs. However, it has retained its 10 per cent volume CAGR estimate for FY25–FY28.

 

“We maintain our capex outlay estimates at ₹43 billion for FY26–FY28, as management remains confident about expansion timelines, despite slower capex in FY26 versus earlier guidance. We have rolled forward our valuation base to March 2028 from September 2027 earlier,” the brokerage said. 

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