JK Lakshmi Cement shares: Brokerage sees over 41% upside potential; here's why

Choice Institutional Equities reiterated its 'BUY' rating on JK Lakshmi Cement Ltd (JKLC) shares, citing strong capacity expansion plans, expected cost savings and a simplified corporate structure following recent amalgamations.

The brokerage has set a revised 12-month target price of Rs 1,075, implying an upside of 41.26 per cent from the assessed market price of Rs 761. The target was trimmed from an earlier Rs 1,175 as the brokerage moderated its margin estimates for FY27E and FY28E.

Choice Institutional Equities said, "We maintain our BUY rating on JKLC with a revised TP of Rs 1,075 (implying an upside of 41.2 per cent) (vs earlier Rs 1,175), as we moderate our margin forecast for FY27E/28E. On our TP, JKLC'S implied FY28E EV/EBITDA is 9.9x, which is reasonable. The amalgamation of Udaipur Cement Works Ltd. (UCWL) and its other subsidiaries into JKLC removes the overhang of a complex corporate structure."

The brokerage said it remains constructive on the stock, supported by multiple growth drivers. "We continue to be constructive on JKLC owing to: 1) Capacity addition plans to reach 30 Mnt by FY30E, 2) Positive pricing momentum expected owing to sectoral tailwinds and 3) Cost-saving of IN 120/t expected in the next 2 years."

Choice added, "We adopt a robust EV-to-CE valuation framework, which provides a rational basis for assigning a valuation multiple that captures fundamentals (ROCE expansion of 380 bps over FY25-28E)."

On earnings outlook, the brokerage expects steady growth over the medium term. "We forecast JKLC's EBITDA to expand at a CAGR of 18.8 per cent over FY25-28E, supported by our assumption of volume growth of 8/6/6 per cent and realisation growth of 3.5/0.5/0 per cent in FY26E/FY27E/FY28E, respectively."

Choice further said, "We value JKLC on our EV/CE framework, where we assign an EV/CE multiple of 2.2x/2.2x for FY27E/28E. This framework gives us the flexibility to assign a commensurate valuation multiple based on an objective assessment of the quantifiable forecast financial performance of the company. We did a sanity check of our EV/CE TP using implied EV/EBITDA multiples. On our TP of Rs 1,075, the implied FY28E EV/EBITDA multiple translates to 9.9x, which is reasonable in our view."

On the earnings front, JK Lakshmi Cement reported Q3FY26 revenue and EBITDA of Rs 1,588.4 crore, registering a 6.1 per cent year-on-year (YoY) increase.