JK Lakshmi Cement volume growth beats estimates as 30mtpa expansion stays on track

Investment View and Key Takeaways

Motilal Oswal Financial Services Ltd. (MOFSL) retained its Buy recommendation on JK Lakshmi Cement in its August 6, 2026 results update. The investment view is supported by better-than-estimated 1QFY27 volumes and realisations, the company’s capacity-expansion roadmap and expected earnings growth. However, near-term profitability is expected to remain under pressure from elevated input costs and seasonal factors.

1QFY27 Financial Performance

JK Lakshmi Cement reported consolidated 1QFY27 revenue of Rs 1,900 crore, up around 9 per cent year on year and around 7 per cent above MOFSL’s estimate. Sales volume grew around 8 per cent year on year to 3.6 mt, 3 per cent ahead of the broker’s estimate. Blended realisation increased around 1 per cent year on year and 8 per cent quarter on quarter to Rs 5,294 per tonne, approximately 4 per cent above estimates, aided by geo-mix optimisation and price increases in key markets.

Margin Pressure and Cost Outlook

Margin pressure reflected a 6 per cent year-on-year increase in operating cost per tonne. Other expenses and variable costs per tonne rose around 14 per cent and 12 per cent, respectively, while employee and freight costs per tonne declined around 5 per cent and 4 per cent. Operating margin contracted 4.3 percentage points year on year to around 14 per cent.

Management indicated that fuel and packaging costs, monsoon seasonality and maintenance shutdowns could intensify cost pressure in 2QFY27. Fuel cost rose to Rs 1.65 per kcal in 1QFY27 from Rs 1.54 per kcal in 4QFY26 and is expected to rise towards Rs 1.80-1.85 per kcal in 2QFY27. Packaging-cost inflation, higher diesel prices, fly-ash shortages and imported coal and petcoke inflation are further margin risks.

Demand, Utilisation and Pricing

Management said industry demand grew around 8 per cent year on year in 1QFY27 and expects infrastructure and housing activity to sustain demand. JK Lakshmi Cement operated at around 76 per cent capacity utilisation, above industry utilisation of around 73-74 per cent, while clinker utilisation was around 95 per cent.

The company reduced lead distance by around 20 km year on year and 10 km quarter on quarter to 368 km, improving net-plant realisation by Rs 60-70 per tonne. Management stated that cement prices were broadly stable during July-August 2026, but further price increases are required, particularly in the Northern region, to offset higher costs.

Capacity Expansion and Balance Sheet

JK Lakshmi Cement is targeting 30 mtpa capacity by FY30 from current capacity of 18 mtpa. Expansion projects, including Durg and grinding units at Patratu and Madhubani, are progressing, with major equipment orders placed.

The company incurred capex of Rs 300 crore in 1QFY27 and plans capex of Rs 1,500 crore in FY27 and Rs 2,000 crore in FY28, alongside land acquisition at Kutch and Nagaur. The Northeast project remains under mining approvals, land acquisition and regulatory clearances.

Net debt was Rs 1,520 crore as of June 2026. Management intends to keep net debt to EBITDA below 2.5-2.75 times while executing the expansion plan.

Estimates, Valuation and Monitorables

MOFSL largely maintained its FY27-FY28 estimates. It forecasts revenue, EBITDA and PAT CAGR of around 9 per cent, 10 per cent and 7 per cent, respectively, over FY26-FY28, with volume CAGR of around 8 per cent.

MOFSL expects net debt to rise to Rs 2,830 crore by FY28 and net debt to EBITDA to reach 2.3 times because of aggressive capex. The broker identifies cement-pricing actions and progress of expansion in the Eastern and Central regions as key monitorables.

The target price of Rs 700 is based on 9 times FY28E EV/EBITDA, compared with the stock’s trading valuation of around 8 times FY27E and FY28E EV/EBITDA.