Company Update : JK Lakshmi Cement Ltd by Emkay Global Financial Services Ltd
Voice of the head: Strengthening base for the next leap
We interacted with the CEO and CFO of JK Lakshmi Cement (JKLC), to understand its medium-term growth strategy. KTAs: 1) Margins – JKLC endeavours to be in the top quartile of the industry and further narrow the gap with sector leaders. 2) The company aims to grow better than the industry in H2FY26 and FY27. (3) It is committed to achieve capacity of 30mtpa (organically) in the medium term, with near-term milestones of ~20/23mtpa by FY27/FY28 (18mtpa currently). 4) It plans to incur capex of Rs36-40bn over FY26-28 (including preliminary capex for greenfield projects) while keeping net debt to EBITDA at ~2x. 5) JKLC is pursuing internal efficiency measures to deliver Rs100–120/t of cost savings over the next 12–24 months. 6) Non-trade prices have declined (Rs10-15/bag), while trade prices broadly held up in JKLC’s core markets during Q3FY26TD. At CMP, JKLC trades at ~8x FY27 EV/E (Bloomberg estimates). Key risks: delay in commissioning of Durg Line-2, sharp fall/rise in cement/input prices, etc.
Focus on narrowing profitability gap with sector leaders
JKLC will continue its strategy to improve operating margins through better product profile, better-yielding geography mix, higher premium cement share and Rs100-120/t cuts in operating cost in the near to medium term. In addition, better industry dynamics (read pricing scenario) should aid JKLC in shrinking the profitability gap with industry leaders and attain EBITDA/t of Rs1,000. Of the total cost savings of ~Rs120/t, major savings (Rs50/t) will emanate from higher RE power share and thermal substitution rate.
Endeavor to maintain volume growth buoyancy
With ~12% YoY volume growth in H1FY26, JKLC will look to clock high single-digit growth in H2FY26 (high base and dull demand in early-Q3FY26) and FY27. Moreover, the Durg Line-2—expected to commission by Q4FY27—will help boost volume growth FY28 onward, with orders of long-lead items already placed.
Target to achieve >1.5x of current capacity; ~23mtpa by FY28
JKLC, currently at 18mtpa, has laid out clear plans to reach 30mtpa in the medium term via projects including greenfield expansion in Assam, Nagaur, RJ, and Kutch, GJ. In its pursuit of 30mtpa, JKLC plans to commission a brownfield project at Durg (Line-2, 2.3mtpa) and corresponding grinding units (4.6mtpa) at Durg (1.2mtpa), Prayagraj, UP (1.2mtpa), Patratu, JH (1mtpa), and Madhubani, BH (1.2mtpa). Through these, JKLC expects to achieve ~20/23mtpa by FY27/FY28.
Disciplined approach toward the balance sheet
The company will spend ~Rs33bn on the Durg Line-2 expansion and cumulatively spend Rs36-40bn over FY26-28 as capex. This amount includes preliminary capex for upcoming greenfield expansion projects as well. Overall, the management reiterated to maintain the net debt to EBITDA at ~2x during the capex cycle until FY28.
For More Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354
