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JK Lakshmi Cement's Q2FY25 volumes came in at 1.9mnt, down 14.3% YoY and 19.8% QoQ,
resulting in revenues of INR11,413mn, a decline of 21.4% YoY and 21.0% QoQ. The volume
decline was attributed to longer layoffs during the election period and extended monsoon.
EBITDA/t for the quarter was INR330/t, down 59.9% YoY and 58.5% QoQ, the drop mainly due to
lower realizations. PAT for Q2FY25 stood at INR75mn, down 90.9% YoY and 95.2% QoQ, with an
EPS of INR0.6. During Q2FY25, the company's Net Debt to EBITDA ratio was 0.58x, and Net Debt
to Equity stood at 0.13x. Additionally, the company is implementing a project to enhance its
Thermal Substitution Rate (TSR) from 4% to 16% in a phased manner at its Sirohi Cement Plant as
part of its green initiatives.

* Expansion Plan- The management has outlined a capex of INR5,000mn for FY25E,
INR7,000mn for FY26E, and INR8,000mn for FY27E. The company is undertaking an expansion
to add 4.6mnt of cement capacity and approximately 2 to 2.3mnt of clinker capacity at its Durg
plant. Initially, the focus will be on the Durg clinkerization and grinding unit in UP, followed by
two additional grinding units at other locations. Management anticipates that the 1
st phase,including clinkerization and cement capacity will be operational by FY26-27E. So far, limited
expenditure has been incurred on the Durg expansion. The sewer grinding unit, expected to
add 1.35mnt of capacity, is projected to be commissioned Q4FY25. The Durg expansion will
likely require another two to three years to complete. Meanwhile, the Udaipur expansion is
nearly finished, with only minor tasks remaining. The Railway Siding project is underway and
expected to be completed by the Q1FY26E. JK Lakshmi Cement is actively working towards
surpassing its targeted capacity of 30mnt by FY30E.

* Prices Started Improving- In Q2FY25, the company’s realization stood at INR6,136, marking a
decline of 8.3% YoY and 1.4% QoQ. The largest price drops occurred in the East, West, and
North regions, while the South and Northeast regions saw smaller declines. The company’s
price decrease is below the industry average. In response to depressed prices, the company
chose not to sell in certain non-core markets where prices fell below variable costs. Since the
Q3 average, prices have shown some improvement, beginning to rise in September and
continuing with a slight upward trend in October. Following Diwali, demand is anticipated to
improve, potentially leading to further price increases.

* Total cost/t came at INR5,806/t- During the quarter, total cost/t declined by 1.1% YoY but
rose by 6.9% QoQ. The YoY decrease in total cost/t was primarily due to reduced power and
fuel costs, as well as lower freight expenses. Power and fuel costs/t for the quarter were
INR1,324/t, a 17.3% decrease from the previous year and 47% of Renewable energy is being
used in 2QFY25. This reduction was driven by lower fuel expenses and the company's focus on
alternative fuels (TSR) and renewable energy. Management anticipates further reductions inz
power and fuel costs by using other alternatives. Freight expenses/t for the quarter were
INR1,269/t, down 3.3% YoY, largely due to efforts to reduce lead distance.

Outlook and Valuation:

The cement sector outlook appears highly promising for the coming year,
driven by the government's strong focus on infrastructure development and increased budgetary
support for the sector. The company’s management remains dedicated to its ambitious capital
expenditure plans, targeting a capacity of 30mnt by FY30E. Additionally, the company is focused
on expanding its market share, though volume growth is expected for coming years. We expect
Volume/Revenue/EBITDA to grow at a CAGR of 0.5%/0.9%/8.7% respectively over FY24-FY27E.
Our target EV/EBITDA multiple is 9.0x (unchanged) on Sept-26E EBITDA, hence we ascribe a target
price of INR703, reducing our rating to Sell.

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