Top Conviction Ideas : Buy JK Lakshmi Cement Ltd for Target Rs. 1,030 - Axis Securities Ltd
Recommendation Rationale
* The company has planned a capacity expansion of 4.6 mtpa in cement grinding and 2.3 mtpa in clinker at a total capital cost of Rs 3,000 Cr ($75/tonne), to be commissioned in phases over FY27–FY28. These expansions are expected to strengthen market share and support sustained volume and revenue growth. We project volume and revenue CAGR of 8% and 12%, respectively, over FY25–27E.
* JKLC reported a 15% YoY increase in revenue to Rs 1,532 Cr. This was driven by a 15% YoY growth in sales volume, outperforming the industry's average growth.
* The company aims to strengthen performance through key strategic initiatives, including optimizing its geo-mix, increasing the production and sales of blended cement, raising the share of trade sales, and expanding its portfolio of premium and value-added products. It also plans to improve logistics efficiency and enhance the share of renewable power and AFR usage. JKLC expects cost savings of Rs 100-120 per tonne. We project EBITDA/tonne growth at an 18% CAGR over FY25-27E, reaching Rs 995/tonne, supported by better realisations, higher volumes, and cost-saving measures.
* Given the government's emphasis on infrastructure development and increased budgetary allocation for housing and road projects, the outlook for the cement sector remains positive for the upcoming year.
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