PL Capital initiates coverage on JK Cement, JK Lakshmi, JSW Cement; details

PL Capital has initiated coverage on three cement stocks– JK Cement, JK Lakshmi, and JSW Cement– with a positive outlook at current lower valuations. The brokerage has an ‘Accumulate’ rating on JK Cement for a target of ₹6,173 per share; ‘Buy’ rating on both JK Lakshmi and JSW Cement with a target of ₹891 and ₹143, respectively. 

 

The brokerage expects overall cement demand to grow at a 6.5 per cent compound annual growth rate (CAGR) over the next three years, aided by rural housing. However, a wave of new capacity additions is likely to keep industry utilisation capped below 70 per cent.

 

 

At the same time, industry capacity is projected to rise faster, at 7.7 per cent CAGR, from 646 mt in FY25 to around 808 mtpa by FY28, pushing the demand–supply gap wider and capping utilisation at roughly 68–70 per cent.

 

On the stock specific front, JK Cement has an 80 per cent capacity share in the stable and fast-growing North and Central region, the brokerage noted. It also has a strong presence in white cement, as well as value-added products such as wall putty, adhesives and paints. Over the past two decades, its cement capacity grew at a 10 per cent CAGR from 3.6mtpa in FY05 to 24.76mtpa in FY25.  ALSO READ | HDFC Sec turns bullish on Dr Lal PathLabs; upgrades to 'Buy'; raises target 

Given this, PL Capital sees JK Cement entering into a transformational phase, with planned ongoing capex of ₹7,800 crore, reaching 31.26mtpa by the end of FY26E and further likely to cross 50 mtpa by FY30E, positioning it among the fastest-growing large cement companies in India. Further, it is well-positioned to benefit from India’s infrastructure growth story, supported by steady & timely capacity additions in grey cement, strong market presence in the fast-growing Central and Northern regions, and a dominant position in the white cement segment.

 

Meanwhile, JK Lakshmi Cement is planning to reach 30mtpa by FY30E, with a medium-term target of 22.4mtpa by FY28E at ₹2,500 capex. Although capex intensity is low as of now amid weak market dynamics, the brokerage expects the company to step up capex intensity to achieve its medium-term target. Further, as cash flows improve, the cement company is likely to increasecapex toward announced greenfield projects to maintain its share in the fast-growing markets and penetrate untapped regions, believes PL Capital.   ALSO READ | Mirae Asset Sharekhan bullish on Lemon Tree on strong pipeline, RevPAR 

JSW Cement operates 21.6mtpa of grinding capacity (11mtpa/4.5mtpa/6.1mtpa across South/West/East India) supported by 6.44mtpa clinker capacity. The company is undertaking a mix of greenfield and brownfield expansions to scale grinding capacity to 41.85mtpa and clinker capacity to 13mtpa over the next five years. In the near term, according to the brokerage, volumes will be driven by the ongoing 3.5mtpa Nagaur integrated unit (to be commissioned in Q4FY26), giving entry into the Northern region.

 

Disclaimer: View and outlook shared belong to the respective brokerages and are not endorsed by Business Standard. Readers discretion is advised.