JK Lakshmi Cement Sees 'Buy' Upgrade from Choice Broking with 25% Upside Potential

Choice Equity Broking has issued a positive outlook on JK Lakshmi Cement, upgrading its stock rating to 'Buy' from 'Add' and maintaining a target price of ₹7,200. This suggests a potential upside of nearly 25% from the current trading price of ₹5,702. The brokerage firm points out that even though the stock has seen a 24.5% correction from its 52-week high, its underlying business strengths remain solid. Key factors supporting this optimistic view include favourable industry trends, substantial capacity enhancements, and the company's prudent financial practices.

Expansion Pipeline: JK Lakshmi Cement is executing an ambitious expansion plan aimed at reaching a production capacity of 32 million tonnes by the end of FY26. This involves commissioning several new grinding and integrated units across Prayagraj, Hamirpur, Buxar, and Jaisalmer, along with a new wall putty plant in Rajasthan. The company has earmarked ₹2,800–3,000 crore for capital expenditure in FY26.

Financial Health: In the second quarter of FY26, the company reported a consolidated revenue of ₹3,019 crore, a 17.9% year-on-year increase, driven by higher sales volumes (up 14.6% to 5 million tonnes) and stable pricing. Ebitda saw a significant surge of 57% year-on-year to ₹447 crore. Choice Broking forecasts Ebitda to grow at a 20% CAGR between FY25 and FY28, with net profit expected to rise from ₹1,155 crore in FY26 to ₹1,867 crore by FY28, and return on capital employed (RoCE) improving to 16.1%.

Cost Efficiency: The management is focused on cost savings, targeting ₹75–90 per tonne reduction by FY26 through efficiency improvements and increased use of green power. They anticipate further cost reductions as production volumes grow.

Impact: This recommendation and positive outlook from a reputable brokerage are likely to boost investor confidence in JK Lakshmi Cement. The company's aggressive expansion plans and focus on cost control, combined with favourable industry conditions, position it for strong earnings growth, potentially leading to a rerating of its stock and improved shareholder returns. Rating: 8/10

Heading: Difficult Terms and Their Meanings

Ebitda: Earnings Before Interest, Taxes, Depreciation, and Amortization. It's a measure of a company's operating performance.

RoCE (Return on Capital Employed): A profitability ratio that measures how efficiently a company is using its capital to generate profits.

EV/CE (Enterprise Value to Capital Employed): A valuation metric that compares a company's total value (including debt) to the capital it employs.

EV/Ebitda (Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization): Another valuation metric used to assess a company's value relative to its operating earnings.

Price-to-Earnings (P/E) Ratio: A valuation metric that compares a company's stock price to its earnings per share.

Cement Tailwinds: Favorable market conditions or trends that support growth and profitability in the cement industry.

Green Power Adoption: The use of renewable energy sources (like solar or wind) in the company's operations.

Leverage Strategy: A plan for managing a company's debt levels.

Net Debt-to-Ebitda: A financial leverage ratio that indicates how many years it would take for a company to pay back its debt from its operating earnings.