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Future expansion plans: JK Lakshmi is actively working to exceed its targeted capacity of 30mmt. Over the next 2-3 years, the company plans to invest approximately INR40,000mn in capital expenditure. The expansion includes increasing the Clinker Capacity at its integrated Cement Plant in Durg, Chhattisgarh, by adding an additional Clinker Line of 2.3mntpa and establishing four Cement Grinding Units totalling 4.6mntpa in Durg, Chhattisgarh. Additionally, three Split Location Cement Grinding Units with a combined Cement Grinding Capacity of 3.4mntpa will be set up in Prayagraj, Madhubani, and Patratu. The estimated cost of this project is INR25,000mn, with funding expected through Term Loans from Banks INR17,500mn and the remaining through Internal Accruals. Furthermore, a Railway Siding is being constructed at the Durg Cement Plant at a cost of INR 3,250mn, with funding divided between a debt of INR 2,250mn and the balance from Internal Accruals. Simultaneously, the company is enhancing its Waste Heat Recovery (WHR) Capacity by 3.5 MW at Sirohi, anticipated to be operational in Q4FY24E

Total cost came at INR5,718/t for the quarter: In Q3FY24, power and fuel costs were INR 3,272mn, vs INR3,476mn in Q2FY24 and INR4,345mn. The decrease in power and fuel costs is mainly due to lower fuel expenses. The company's current Kcal is 1.78kcal vs 2.04 kcal in previous quarter. The Annual Freight Rate (AFR) currently stands at 4%, with plans to increase it to 16% by fiscal year 2025. Freight expenses for the quarter were INR3,131mn, vs INR2,848mn in Q2FY24 and INR2,942mn in Q3FY23. The increase on surcharge is mainly due to levy of surcharge. However, the company intends to reduce them further by adding railway sidings, expected to begin in Q3-Q4 FY25.

Outlook and Valuation: The outlook for the Cement Sector appears highly positive in the coming year due to the Government's emphasis on Infrastructure Development and increased budgetary allocation towards this sector. The company's management has maintained its guidance of achieving double digit volume growth for FY24, and they also expect EBITDA per ton to reach INR 1,000 for FY25E, and management has anticipated to be in top 5 companies in term of EBITDA/t. We expects Revenue/EBITDA to grow at a CAGR of 5.9%/19.0% respectively over FY23-FY26E. Our target EV/EBITDA multiple is 9.0x (modified) on FY26E EBITDA, hence we ascribe a target price of INR955,  with ADD rating.

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SEBI Registration no.: INZ 000160131