JSW Cement: Goldman Sachs on rerating trigger, debt-free peers Ambuja, UltraTech

Goldman Sachs on Monday initiated coverage of JSW Cement with a ‘Neutral’ rating, citing the importance of balancing growth and profitability for the company amid industry consolidation. The foreign brokerage said JSW Cement is currently operating with 20.6mn tons of grinding capacity and is targeting 42 million tons over the next five years. It called JSW Cement among one of India's fastest-growing cement companies. 

That said, the brokerage believes that JSW Cement's ability to successfully execute this capacity expansion, improve Ebitda per ton, and manage leverage will be key for any potential re-rating. 

"This is pertinent in an industry where large players such as Ultratech Cement (185mt), Ambuja Cements (104mt) have debt-free balance sheets enabling them to potentially consolidate market share. We initiate with a Neutral rating and a FY27E EV/Ebitda multiple of 14 times, with a 12 months target price of Rs 147 implying 3 per cent potential downside (vs average 2 per cent downside for our cement coverage). We value the larger peers at 16-18.5X EV/Ebitda and the smaller peers with low growth between 7.5-11 times," Goldman Sachs said.

MOFSL also retained 'Neutral' on the JSW Cement stock earlier this month. The brokerage cited the company management saying a good monsoon, increased government infra spending, and GST reforms bode well for the industry’s demand outlook, anticipating cement demand growth at 6.5-7.5 per cent in FY26. 

"Its cost saving (increase in green power, AFR usages, lead distance optimization) and revenue growth (introduction of premium products) initiatives are likely to yield Rs 400/tonee over the next two years. In terms of expansions, Sambalpur GU (1.0mtpa) is expected to be commissioned in Sep’25, while Nagaur integrated plant (3.3mtpa/3.5mtpa clinker/grinding) is expected to be commissioned in FY26," it noted. 

Despite improvement in profitability, MOFSL however expected debt for JSW Cement to remain elevated, driven by higher capex of Rs 5,600 crore over FY25-28E.