JK Lakshmi Cement Q1 FY27 earnings call

JK Lakshmi Cement reported a 'reasonably all right' Q1 FY27, with industry demand growing by approximately 8%. The overall installed capacity in India reached about 725 million tons, with an average industry capacity utilization of 73-74%. The company's realization improved by around 9% sequentially, primarily driven by geo-mix optimization and non-trade price increases. Non-cement revenue for the quarter was INR 185 crores, achieving an EBITDA margin of 5%.

The cement industry faced significant cost pressures due to geopolitical situations impacting fuel (coal, pet coke) and other raw material prices. Q1 fuel cost increased to INR 1.65 per Kcal from INR 1.54. Management expects Q2 to see further cost increases, with fuel potentially reaching INR 1.8-1.85 per Kcal and packaging costs rising by INR 3.5-4 per bag. JK Lakshmi Cement is mitigating this by increasing indigenous coal usage, focusing on renewable energy, and optimizing logistics, though pass-through of costs has been partial.

The company spent INR 300 crores on capex in Q1 FY27, with INR 400 crores allocated to the Durg expansion project to date. For FY27, the total capex is projected at INR 1,500 crores, rising to INR 2,000 crores in FY28, and INR 1,500 crores in FY29. The long-term target is to achieve 30 million tons capacity by FY30, with INR 3,000 crores for Durg and INR 1,500 crores for Northeast expansion, excluding land acquisition costs for Nagore and Kutch. The installed capacity is expected to reach 18 million tons by FY27 end.

The 9% sequential increase in realization was attributed to geo-mix optimization, reducing lead distance by 20 kilometers, and higher non-trade prices, especially in markets like Gujarat and Mumbai. The company's blended cement percentage increased from 62% to 64%. Management emphasized a systematic approach to geo-mix, improving presence in core markets during high demand and wider dispersion during softer demand to maintain market share and optimize realization.

JK Lakshmi Cement's renewable energy share stands at 49%, comprising 129 MW solar, 45 MW WHRS, and 4 MW wind. The company is investing INR 20 crores in a 42 MW captive solar power project with an expected payback of less than two years and savings of INR 1.65 per unit. This project is anticipated to yield benefits from Q4 FY27 or Q1 FY28, further enhancing cost efficiency.

Despite negative recommendations from some proxy advisors regarding certain resolutions at the recent AGM, mutual funds and FIIs took a pragmatic view. All proposed resolutions were passed with an overwhelming majority, demonstrating strong shareholder confidence in the company's approach. Management noted that proxy advisors often attach company responses without changing their recommendations, highlighting the importance of direct engagement with investors.