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Healthy volume growth; margin pressure ahead

* JK Lakshmi Cement’s (JKLC) 1QFY27 revenue grew ~9% YoY to INR19.0b (~7% above our estimates, driven by higher volume/realization vs. our estimates). EBITDA declined ~17% YoY to INR2.6b (~9% beat). EBITDA/t declined ~23% YoY to INR719 (vs. est. of INR679). OPM contracted 4.3pp YoY to ~14% (in line). PAT (after MI) declined ~28% YoY to INR1.1b (+13% vs. our estimates).

* Management indicated higher cost pressure in 2QFY27 due to elevated fuel/packaging costs, along with the seasonal impact of monsoon/maintenance shutdown. However, it remains focused on optimizing costs through internal cost-saving measures. The sharp sequential improvement in realizations was led by geo-mix optimization and price hikes in key markets. Cement prices have remained largely stable in 2Q (QTD). The company remains optimistic on cement demand, supported by infra and housing segments. Capacity expansions are largely on track, and the company reiterates its long-term capacity expansion target of 30mtpa by FY30.

* We largely maintain our estimates for FY27-FY28E. The stock is trading at 8x FY27/FY28E EV/EBITDA. We value the stock at 9x FY28E EV/EBITDA to arrive at a TP of INR700. Reiterate BUY

Sales volume up ~8% YoY; realization/t increases ~1% YoY (up ~8% QoQ)

* Consolidated revenue/EBITDA/adj. PAT stood at INR19.0b/INR2.6b/INR1.1b (+9/-17%/-28% YoY and +7%/+9%/+13% vs. our estimates). Sales volume increased ~8% YoY to 3.6mt (+3% vs. estimates). Realization/t increased ~1% YoY (up ~8% QoQ) to INR5,294/t (~4% above estimates).

* Opex/t was up ~6% YoY, led by an increase in other expenses/variable cost per ton by ~14%/12% YoY. Employee/Freight cost/t declined ~5%/4% YoY. OPM contracted 4.3pp YoY to ~14%, and EBITDA/t declined ~23% YoY to INR719. Depreciation rose ~7% YoY, while finance costs declined ~2% YoY. Other income declined ~31% YoY.

* Net debt stood at INR15.2b vs. INR12.7b as of Mar’26. Net debt-to-EBITDA ratio was at 1.38x vs. 1.12x as of Mar’23

Valuation and view

* JKLC’s 1QFY27 operating performance was above estimates, led by higher volume and realization/t. However, profitability is likely to remain under pressure in the near-term due to elevated input costs and seasonality impact. We estimate the company’s volume growth to be largely in line with industry in FY27. Going forward, we believe cement pricing actions and progress on its expansion in the Eastern and Central regions will be key monitorables.

* We estimate a CAGR of ~9%/10%/7% in revenue/EBITDA/PAT over FY26-28. We estimate EBITDA/t at INR734/INR775 in FY27/FY28 vs. INR757 in FY26, with a volume CAGR of ~8% over FY26-28. We expect net debt to increase to INR28.3b by FY28 vs. INR15.2b as of Jun’26, with net debt-to-EBITDA ratio at 2.3x in FY28 vs. 1.4x as of Jun’26, given its aggressive capex plan. The stock is trading at 8x FY27E/FY28E EV/EBITDA. We value the stock at 9x FY28E EV/EBITDA to arrive at a TP of INR700. Reiterate BUY.

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