Detailed Narrative
Capacity Expansion and Long-Term Growth Strategy
JK Lakshmi Cement is targeting a total capacity of 30 million tons by FY30. This includes the Durg Brownfield expansion, which will increase capacity to 22.6 million tons by FY28 at a cost of Rs. 3,000 crores. Major long delivery items for Durg have been ordered, with Rs. 50 crores already spent. Additionally, three greenfield plants in Nagaur, Kutch, and Assam are planned for FY29-FY30, with Nagaur and Kutch each adding 3 million tons of cement capacity (2 million tons clinker). The company anticipates a greenfield capex of around $100 per ton by 2030.
Operational Efficiency and Cost Management Initiatives
The company is actively working on various levers to improve performance, including enhancing premium product proportion, reducing distribution costs, and improving plant efficiency. Management reiterated its target of achieving at least Rs. 120 in cost savings within 18-24 months and confirmed being on track. The premium product proportion has already increased from 23% to 26% QoQ, driven by new brands like Green Plus. The company is also exploring technology, AI, and digital algorithms for process optimization.
Sales Mix and Realization Dynamics
In Q2 FY26, the company saw an improved blended realization partly due to a shift in geographical mix, with North sales (including Gujarat) increasing to 69% of total sales. The premium product proportion also rose to 26%. The commissioning of the Surat grinding station contributed to higher volumes in Gujarat, a market with better realization. While trade prices remained largely intact, non-trade prices saw a decline, which management attributes to passing on benefits to customers and expects to normalize with improved demand.
Green Power and Fuel Cost Trends
The green power proportion decreased to 46% in Q2 FY26, down from 53% in the previous quarter. This decline was primarily due to plant shutdowns and adverse weather conditions affecting WHRS production and solar generation, leading to an increase in power and fuel costs. Petcoke prices were noted to be in the range of $116-$120 per ton. Management expects green power contribution to improve in the current quarter with better WHRS generation and solar availability.
Overland Conveyor Belt Project Update
The critical overland conveyor belt project, aimed at improving logistics efficiency, is facing delays. While the sale board has approved the leasing of land and right of way, final approval is pending with the Ministry of Steel. Management is actively pursuing this approval but acknowledges the difficulty in providing a definitive timeline due to external dependencies.
Financial Outlays and Leverage
The total capex for FY26 is projected to be between Rs. 1,000 and Rs. 1,200 crores, with Rs. 50 crores already spent on the Durg expansion till September. For the subsequent two years (FY27-FY28), annual capex is estimated at Rs. 1,300 to Rs. 1,500 crores. The company aims to maintain its net debt-to-EBITDA ratio below three times, even with aggressive expansion plans. Receivables have nearly doubled from March, which management considers a normal fluctuation.