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Higher other op. income helps to beat estimates

* JK Cement (JKCE)’s 3QFY25 result was above our estimates primarily due to higher other operating income, which increased by INR71/t QoQ. This led to a 2% beat in consolidated realization and, in turn, better operating performance. EBITDA was at INR4.9b (-21% YoY; +7% vs. estimate) and EBITDA/t was at INR1,010 (-24% YoY; +7% vs. estimate). Better operating performance and lower interest expenses (-8% QoQ; -8% vs. estimate) led to a 21% beat in profits at INR1.9b (-33% YoY).

* The company announced the acquisition of Saifco Cements Private Limited, which has a clinker/cement capacity of 0.26/0.42mtpa in Srinagar and reported a turnover of INR863m in FY24. JKCE will acquire a 60% stake at INR1.74b (EV/t of ~USD80). Its 6mtpa capacity expansion plan is on track (commissioning by Dec’25), which includes 3,3mtpa clinker capacity at Panna, 1mtpa grinding capacity each at Panna, Hamirpur and Prayagraj, and 3mtpa grinding unit in Bihar.

* We have a BUY rating on the stock. We will review our assumptions after the conference call.

Sales volumes up 4% YoY; grey cement realization up 1% QoQ

* JKCE’s consolidated revenue/EBITDA/adj. PAT stood at INR29.3b/INR4.9b/ INR1.9b (flat/-21%/-33% YoY and up 2%/7%/21% vs. our est.). Combined sales volume was up 4% YoY (in line) as grey cement volume was up 4% YoY (-1% vs. estimate), while white cement volume was up 6% YoY (+6% vs. estimate). Grey cement realization was down 4.6% YoY but up 1% QoQ. White cement realization was up 1% YoY/2% QoQ. Other op. income/t stood at INR277 vs. INR195/INR206 in 3QFY24 /2QFY25.

* Opex/t increased 2% YoY (+1% vs. estimate), led by 11%/8%/3% increase in employee costs/other expenses/freight costs. Variable cost/t declined 4% YoY/3% QoQ. Fuel consumption cost/kcal was at INR1.5 vs. INR1.82/ INR1.65 in 3QFY24/2QFY25. Lead distance was at 422km vs. 427km/419km in 3QFY24/2QFY25. EBITDA/t was at INR1,010 vs. INR1,332/INR655 in 3QFY24/2QFY25. Other income was up 16% YoY, while depreciation increased 4% YoY. Interest expense was down 2% YoY.

* In 9MFY25, revenue/EBITDA/adj. PAT declined 2%/16%/30% YoY. Sales volume was up 4% YoY, while realization declined 6% YoY. EBITDA/t dipped 19% YoY to INR875. Standalone net debt was at INR31.1b vs. INR25.8b/ INR30.4b in 3QFY24/2QFY25.

Highlights from investors’ presentation

* Cement/clinker capacity utilization was at 73%/85%. Blended cement sales stood at 67% vs. 70% in 2QFY25. Trade sales came in at 66% vs. 65% in 2QFY25. Premium product sales stood at 16% (highest ever).

* Green energy contributed 50% of JKCE’s energy requirements in 9MFY25 vs. 51% in FY24 and it targets to increase the contribution to 75% by FY30. The thermal substitution rate was 11% in 9MFY25 vs. 16.3% in FY24 and the target is to increase it to 35% by FY30.

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