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Higher volume and lower costs drive beat

* JKLC’s 3QFY25 EBITDA was above our estimate, led by higher volumes (~4% beat) and lower opex/t compared to our projections. Consol. EBITDA declined ~33% YoY to INR2.0b (~7% beat) and EBITDA/t declined ~35% YoY to INR666 (vs. our est. of INR651, as cost benefits were partly offset by lower realization/t). OPM contracted 4.3pp YoY to ~13%. Adj PAT declined ~57% YoY to INR594m (18% above estimates, led by lower ETR).

* The company is expanding the Surat GU capacity by 1.35mtpa and further increasing capacity in the East region. It is expanding clinker capacity at the Durg plant in Chhattisgarh by 2.3mtpa and setting up four cement GUs (incl. three split GUs in the East and Central regions) with an aggregate capacity of 4.6mtpa. Project costs for these capacity expansions, estimated at INR27.3b, will be funded through a mix of debt and internal accruals.

* We have a BUY rating on the stock and will review our assumptions after the concall.

Sales volume increases 2% YoY; realization/t declines 14% YoY

* Consolidated revenue/EBITDA/Adj PAT stood at INR15.0b/INR2.0b/594m (down 12%/33%/57% YoY and up 1%/7%/18% vs. our estimate). Sales volume increased 2% YoY to 3.03mt. Realization was down 14% YoY/1% QoQ at INR4,940/t (-3% vs. our estimate).

* Opex/t declined ~10% YoY, driven by an 18% YoY decrease in variable costs per tonne. Freight costs/other expenses per tonne declined 1% YoY (each). OPM contracted 4.3pp YoY to ~13% and EBITDA/t declined 35% YoY to INR666 in 3QFY25. Depreciation/finance costs increased 16% YoY (each). Other income was down 46% YoY.

* 9MFY25 consol. revenue/EBITDA/PAT stood at INR43.0b/INR5.1b/INR1.2b (declined 14%/28%/63% YoY). Volume/realization declined 2%/12% YoY. EBITDA/t declined 27% YoY to INR601 and OPM contracted 2.3pp YoY to ~12%.

Highlights from the management commentary

* The share of green power stood at ~48% in 3QFY25 vs. 39%/47% in FY24/ 2QFY25. The company is implementing a project to increase the TSR share to 16% from 4% at its Sirohi plant in a phased manner.

* With the government's continued focus on infrastructure development, increased budget allocation, and initiatives for housing and road projects, the outlook for the cement sector remains positive for the coming year.

Valuation and view

* JKLC’s operating performance was above estimates, driven by higher volumes and cost control. However, realization was below estimates (down 1% QoQ, despite price hikes in Dec’24). During the concall, we will seek clarification on the sequential drop in realization and the status of various ongoing expansion plans. We have a BUY rating on the stock. However, we will review our assumptions after the concall on 7 th Feb’25 (Concall Link).

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