Buy JK Lakshmi Cement Ltd for the Target Rs.1,150 by Motilal Oswal Financial Services Ltd
EBITDA in line; reiterates capacity target of 30mtpa by FY30
Guides higher-than-industry volume growth for FY26E
* JK Lakshmi Cement (JKLC)’s 1QFY26 EBITDA was in line with our estimate, as the benefits of higher volume and lower opex/t were offset by lower-thanestimated realization. Consolidated EBITDA surged ~40% YoY to INR3.1b, and EBITDA/t increased ~27% YoY to INR936 (est. INR948). OPM surged 3.7pp YoY to ~18%. Adj. PAT increased ~63% YoY to INR1.5b (~19% above our estimates, led by lower depreciation and higher other income).
* Management highlighted that industry volume grew ~5%-6% YoY in 1QFY26. Cement prices have increased during the quarter in the South and East by ~6-9%, while in the North, Central, and West, prices were muted. JKLC guided its volume growth to be higher than the industry in FY26, aided by supplies in the new markets of Uttar Pradesh and eastern Madhya Pradesh. For Durg expansion, it is likely to start placing orders for equipment from 2QFY26 and expects Phase I commissioning by Mar’27 (almost a six-month delay from the initial expectation of Sep’26). The capex for the Durg expansion was also raised to INR30b (from INR25b) due to added equipment, including a railway siding at the split GU and a cost escalation.
* We retain our EBITDA estimates for FY26/27 and introduce our FY28E with this note. We cut our depreciation estimates for FY27 due to a delay in Durg expansion, which leads to ~10% surge in our FY27 PAT estimate. The stock is trading at 12.0x/10.0x FY26E/FY27E EV/EBITDA. We value the stock at 11x Jun’27E EV/EBITDA to arrive at our TP of INR1,150. Reiterate BUY.
Sales volume rises ~10% YoY; realization/t improves ~1% YoY
* Consolidated revenue/EBITDA/PAT stood at INR17.4b/INR3.1b/1.5b (up 11%/40%/63% YoY and up 5%/5%/19% vs. our estimates). Sales volume increased 10% YoY to 3.3mt (+6% vs. our estimates). Realization/t inched up 1% YoY (down 1% QoQ) to INR5,234/t (~1% below our estimates).
* Opex/t declined ~3% YoY (~1% below estimate), led by ~14% YoY decline in variable costs/t, while freight costs/employee costs/other expenses per ton increased 15%/11%/3% YoY. OPM surged 3.7pp YoY to ~18%, and EBITDA/t increased ~27% YoY to INR936 in 1QFY26. Depreciation/finance costs were up 8% YoY (each). Other income was up 70% YoY. ETR stood at 26.5% vs. 32.3% in 1QFY25.
Highlights from the management commentary
* Capacity utilization stood at 79% vs. 69%/84% in 1QFY25/4QFY25. In the East, it is operating at an optimum capacity. Trade sales share stood at 56% vs. 53%/60% YoY/QoQ. Premium cement at 23% vs. 27%/23% YoY/QoQ.
* Lead distance increased to 399km from 372km/393km in 1Q/4QFY25, led by serving in Uttar Pradesh markets, as the company will have its capacity in these markets in the next one and a half years.
* It expects a cost saving of INR100/t+ in the next 12-18 months through a combination of 1) higher green energy share (up to 52% vs. 49% currently), 2) increasing TSR, 3) manufacturing efficiency through AI-led initiatives, and 4) logistics optimization.
Valuation and view
* JKLC has shown strong operating performance in 1QFY26, led by strong volume growth and cost control. While blended realization was muted due to subdued pricing in the North and West regions, the company delivered a resilient EBITDA/t of INR900+. Management believes it has realized synergies up to 80- 90% post-merger of Udaipur Cement Works with JKLC, which helped the company report strong EBITDA/t. It is confident in achieving volume growth higher than the industry, aided by an expansion into newer markets where it is also adding capacity in the next one to two years.
* We estimate a CAGR of ~9%/23%/28% in revenue/EBITDA/PAT over FY25-28 and project an EBITDA/t of INR910/INR1,030/INR1,080 in FY26/FY27/FY28E vs. INR718 in FY26E. However, given the company’s extensive capacity expansion plans, we estimate its net debt will rise to INR30b in FY28 from INR13.3b as of Jun’25. The net debt-to-EBITDA ratio is estimated to be at 1.9x in FY28E vs. 1.0x as of Jun’25 (TTM). The stock trades at 12x/10x FY26E/FY27E EV/EBITDA. We value JKLC at 11x Jun’27E EV/EBITDA to arrive at our TP of INR1,150. Reiterate BUY.
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