JK Lakshmi Cement Q3 Results Review - Strong Profitability; Announced Capacity Expansion Plan: Motilal Oswal

Motilal Oswal Report

JK Lakshmi Cement Ltd.'s Q3 FY24 operating performance was above our estimates, with consolidated Ebitda at Rs 3 billion (up 63% YoY; 18% above our estimate). Ebitda/t increased 52% YoY to Rs 1,021 (estimate Rs 909). OPM was up 6pp YoY to ~18%. Adjusted profit after tax grew 82% YoY to Rs 1.4 billion (estimate Rs 1.2 billion).

Management indicated that cement volume growth (consolidated) should be at ~10% YoY in FY24 (versus earlier estimated ~12-15%). The Eastern region continues to see higher growth, driven by the IHB segment. Cement prices were soft in both January-February- 24.

Management believes that the company’s volume growth would surpass that of the industry’s in FY25, aided by expansion in Udaipur Cement Works Ltd., a subsidiary of the company. Further, it announced the next phase of expansion in the east (including north-east) and aims to reach 30 million tonnes per annum by FY30.

We raised Ebitda estimates by 6% for FY24 (given the outperformance) and 2-3% for FY25-26. JK Lakshmi Cement is trading at 8 times/6.5 times FY25E/FY26E enterprise value/Ebitda.

JK Lakshmi Cement is a cost-efficient player with presence in favorable regions (Gujarat and North). We value JK Lakshmi Cement at 9 times FY26E EV/Ebitda and arrive at a target price of Rs 1,030.

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