After five quarters of mostly muted volume growth, JK Lakshmi Cement Ltd. delivered a double-digit 10.3% uptick to 3.6 million tonnes in the March quarter (Q4FY25).
Pent-up demand and improvement in the pace of ramp-up of Udaipur plant aided volumes. In FY26, it eyes 10% volume growth ahead of industry’s estimated 6-7% growth. This is despite the company facing some delays in capacity expansions.
The northeast expansion via Agrani Cement has been delayed by seven to eight months due to local political and operational challenges. The commissioning timeline for this project remains unclear.
Secondly, the expansion plan in Surat and Durg is also witnessing a delay of up to three months, part of it due to pending environmental clearance. So, now the Surat grinding unit phase-I, with a total capacity addition of 1.35 mtpa is being commissioned in two phases. Half of the capacity is expected to be commissioned by June 2025 and the balance by December 2025.
True, this project will help strengthen its position in western India, but meeting timelines is crucial to grab market share amid elevated competition from larger peers. In the eastern region, it is setting up greenfield grinding units in Prayagraj (Uttar Pradesh) and Madhubani (Bihar).
The management has reiterated its goal to reach 30 million tonnes per annum (mtpa) capacity by FY30 from 16.4 mtpa currently. Even if the northeast project faces a further delay, it would reach this target either organically or through strategic acquisitions, it said in Q4 earnings call.
It holds limestone reserves in Kutch (Gujarat) and Nagaur (Rajasthan), where land acquisition processes are underway. These are expected to support new greenfield plant development in the long-term.
Given the focus on capacity additions, it has raised its capital expenditure guidance for FY26 to ₹1,300 crore ( ₹1,000 crore) and ₹1,800 crore for FY27 ( ₹1,500 crore earlier). This could mean higher leverage. Given JK Lakshmi’s ₹4,000-4,500 crore expansion plans over FY24-28, net debt is likely to remain at an elevated level and reach ₹2,500 crore by FY27 from around ₹1,400 crore currently, said Antique Stock Broking Ltd report on 29 May.
Meanwhile, better volumes and sharp increase in sequential realizations translated into consolidated Ebitda of ₹351.2 crore in Q4FY25 ahead of consensus estimates. Realizations got a boost from increased sales of premium products at 25% versus 11% sequentially.
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What lies ahead
The company would raise premium product sales further with the newly launched portfolio. However, there has been no action on the pricing front. According to the management, cement prices are currently flat in its key markets (north and west) versus Q4FY25 exit prices. It expects prices to be range-bound in June and July due to seasonality. Higher cement prices are crucial for sustainable improvement in realizations.
On the bright side, the company’s cost efficiency measures are estimated to deliver ₹100-120/tonne savings in the next 12-18 months. But that alone may not be enough to revive stock performance.
In this calendar year so far, the JK Lakshmi Cement has given a mere 1% return. “We revise FY26e/FY27e estimates upwards to give cost-saving benefits. However, JK Lakshmi faces challenges from the changing dynamics of its operating areas, following intense pressure from major players,” said BoB Capital Markets report dated 29 May.
“We pencil in a weak 3-year EBITDA/PAT CAGR of 8%10%, factoring in pricing weakness that may be partially offset by a better cost structure,” it added.
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