BUY JSW Cement; Target Of Rs 150, Despite Weaker Q1 Margins: Kotak Neo Research
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JSW Cement's Q1FY27 margins came under pressure from Rajasthan plant startup costs, but Kotak Neo Research has retained its BUY call with a target of Rs 150, citing strong volume growth and reasonable valuations
JSW Cement Ltd. has retained a 'buy' rating from Kotak Neo Research with a fair value of Rs 150, valuing the stock at 8.5x EV/EBITDA on September 2028 estimates. At the current market price of Rs 130, the target price points to further upside.
JSW Cement's Q1FY27 EBITDA came in below estimates, with higher costs and startup expenses at its new Rajasthan plant weighing on operating performance. The clinker and cement unit operated at around 55% utilisation during the quarter, with exit utilisation at about 68%. The plant is yet to break even and reported a loss of around Rs 37 crore in Q1FY27.
The company expects elevated fuel prices to continue weighing on margins in the current quarter, with a more meaningful recovery expected in the second half of FY27.
Volumes, however, remained strong. Blended volumes rose 15.1% year-on-year to 38 lakh tonnes, while blended realisation increased 5.6% year-on-year and 4.8% quarter-on-quarter to Rs 4,977 per tonne. This was ahead of the firm's estimate of Rs 4,942 per tonne.
Demand improved in July, and management expects the recovery to continue into Q2FY27 despite the monsoon season.
Costs remained a concern during the quarter. Blended costs rose 12.2% year-on-year and 9.4% quarter-on-quarter to Rs 4,194 per tonne, mainly due to higher raw material and energy costs. These costs increased 14.9% year-on-year and 15.2% quarter-on-quarter, respectively.
As a result, blended EBITDA per tonne fell 20% year-on-year and 14.4% quarter-on-quarter to Rs 784, below the firm's estimate of Rs 831 per tonne.
JSW Cement Growth Outlook
Kotak Neo Research expects JSW Cement's volumes to maintain healthy double-digit growth over the next few years. EBITDA per tonne is estimated to improve to Rs 842 in FY27, Rs 1,080 in FY28 and Rs 1,114 in FY29, compared with Rs 784 in Q1FY27.
The research firm sees the risk-reward as attractive, citing the company's growth visibility, regional diversification and valuations.
JSW Cement Q1 FY27 Results Snapshot
Separately, JSW Cement reported consolidated net profit of Rs 161 crore for Q1FY27, compared with a loss of Rs 1,356 crore in the year-ago quarter. Consolidated revenue rose 21.6% year-on-year to Rs 1,896 crore, while EBITDA declined 7.5% to Rs 299 crore. The EBITDA margin stood at 15.7%, compared with 20.7% a year earlier.
On a standalone basis, revenue from operations increased to Rs 1,737.89 crore from Rs 1,445.22 crore a year earlier. Power and fuel costs rose to Rs 257.33 crore, while freight and handling expenses stood at Rs 395.57 crore. Finance costs came in at Rs 80.14 crore.
At the time of writing, shares of JSW Cement were up 9.4% so far this year but remained 11% lower over the past 12 months.
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This article is for informational purposes only and should not be considered investment advice from Kotak Neo. For compliance T&C and disclaimers, Visit www.kotakneo.com/disclaimer
Rochelle Britto is a business journalist with 8+ years of experience in financial journalism. She covers equity markets, corporate earnings, IPOs, commodities and the economy.
As a reporter with leading business publications, she has tracked financial markets and covered sectors including banking and financial services, retail, consumer goods, advertising and e-commerce.
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