JK Lakshmi Cement Q2 Results Review - Better Quarter; Profitability To Improve: Dolat Capital

Dolat Capital Report

JK Lakshmi Cement Ltd. reported numbers in line with our estimates. The company on consolidated basis posted +14.6%/ -9% YoY/ QoQ growth in revenue to Rs 15.7 billion led by +13.8% YoY/ -10.2% QoQ growth in volume to 2.9 million tonne coupled with +0.7% YoY/ +1.3% QoQ in realisation/tonne to Rs 5,471.

Ebitda/adjusted profit after tax reported sharp growth of +32.5%/ 51.8% YoY to Rs 2.2 billion/ Rs 927 million.

Outlook and Valuation

JK Lakshmi Cement commissioned 1.5 million tonnes per annum clinker at its subsidiary Udaipur Cement Works Ltd. in October 2023; 2.5 mtpa grinding unit expected to start by March-April 2024 (versus earlier guidance of Q2 FY25) to capture growth in demand.

JK Lakshmi Cement has also announced 1.35 mtpa brownfield grinding unit expansion at Surat, Gujarat with capex of Rs 2.3 billion which is expected to start by H1 FY26. Thus, we factor higher net debt of Rs 14.2 billion/ Rs 12.0 billion/ Rs 8.0 billion for FY24E/ FY25E/ FY26E versus Rs 10.0 billion/ Rs 11.8 bn in FY23/ H1 FY24.

We factor improvement in profitability over FY23-26E.

Stock has run up by ~29% since last update note (July 28, 2023), hence we maintain 'Accumulate' with a revised target price of Rs 879 based on eight times consolidated FY26E enterprise /Ebitda.

Key downside risk: Lower profitability versus our estimates

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