JSW Cements Ltd. (Neutral)

Highlights

JSW Cements Limited (JSWCL) backed by JSW group, incorporated on 2006, is engage in the business of manufacturing and selling various types of cementitious products comprising blended cement which includes Portland slag cement (PSC), Portland composite cement (PCC) and PPC), ordinary Portland cement (OPC) and ground granulated blast furnace slag (GGBS).

They also manufacture and sell clinker and a range of allied cementitious products such as ready-mix concrete (RMC), screened slag, construction chemicals and waterproofing compounds. Their products are used for the construction of small-scale projects such as homes and large-scale projects such as highways, dams, metros, bridges, among others.

JSWCL operate in the Southern, Eastern and Western regions of India. They also operate JSW Cement FZC clinker unit in the UAE. While they currently do not operate in the Northern and Central regions, they intend to create a pan-India footprint by setting up new plants in north and central India, supplemented by expansions in current regions of operation.

The company sell products through a distribution network. They had a network of 4,653 dealers, 8,844 sub-dealers and 158 warehouses. Through dealers and sub-dealers, they serve the retail demand for cement and allied cementitious product in trade channel. They also had 6,559 direct customers in non-trade channel comprising builders and institutional customers to whom the company supply products for the construction of housing, infrastructure and commercial projects in India.

Out of the total proceeds of Rs. 36,000 mn, ~Rs. 8,00 mn would go towards financing the cost of establishing a new integrated cement unit at Nagaur, Rajasthan. ~Rs. 5,200 mn would be utilized towards repayment of certain borrowings availed by the company, ~Rs 2,800 mn would go towards general corporate purpose and ~Rs. 20,000 mn would go towards existing selling shareholders of the company.

Key Highlights

• Indian cement demand is expected to grow at a healthy 7.5-8.5 pct CAGR from FY25 to FY30, which in turn will increase the demand for blended cement, GGBS, OPC, clinker and allied cementitious products. Demand for GGBS in particular is expected to grow at a CAGR of 14-15 pct from FY25 to FY30.
• The company had Installed Grinding Capacity of 20.60 MMTPA, comprises of 11 MMTPA, 4.5 MMTPA and 5.1 MMTPA in the southern, western and eastern regions of India. Also, they had Installed Clinker Capacity of 6.44 MMTPA which includes the Installed Clinker Capacity of JSW Cement FZC. The company intends to increase Installed Grinding Capacity to 41.85 MMTPA and Installed Clinker Capacity to 13.04 MMTPA.
• Limestone, which is a key raw material for cement production. JSWCL has the right to mine across 11 limestone mines in India, with an aggregate limestone residual reserve of 1,089.09 MMT as of FY25. In addition, they have the right to operate two limestone mines which will be operationalised in due course and they also have LoI in relation to five limestone mines for which they are in the process of obtaining mining licenses.
• JSWCL also benefit from the scale of the JSW Group’s overall operations. For instance, certain members of the JSW Group purchase coal from international markets. JSWCL can leverage their intelligence on coal supply to identify the optimal source of coal for plant operations.
• JSWCL’s key growth strategies include (i) Create a pan-India footprint by setting up new plants in north and central India, supplemented by expansions in current regions of operation. (ii) Continue to deepen presence in existing markets and grow market share (iii) Continue to improve operational efficiency and implement cost reduction measures (iv) Continue to focus on sustainable development.
• In FY25 the company reported sales of Rs. 58,131 mn, which fell 3.57 pct YoY primarily on account of reduction in Cement Realization per Tonne by 7.98 pct. While EBITDA of the company dropped 20.15 pct YoY to Rs. 8,270 mn while margins shrank 320 bps to 13.8 pct.  During FY25 the company posted loss of Rs. 1,638 mn against the profit of Rs. 620 mn in FY24.

Key Risk

• JSWCL business is subject to seasonal variations on account of lower demand for products during the monsoon season.
• Cement Business is dependent on infrastructure, housing and industrial/ commercial sectors. Any downturn in these sectors can impact company’s business.

Financial Performance

Peer Comparison based on FY25 Financials

Valuation

JSW Cements Limited (JSWCL) is a part of JSW Group and as part of the JSW Group, they benefit from synergies with the long established JSW brand. Given the commoditized nature of business and low single digit improvement in realizations in last decades, makes company to focus on cost savings to improve margins. However, Debt repayment from IPO proceeds will save some finance cost and improve bottom-line of the company. At the upper end of the price band of Rs. 147, the issue is priced at an EV/ adjusted EBITDA of 28.5x its FY25 earnings on post issue equity capital. The issue appears to be fully priced.

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