JK Lakshmi Cement Limited — Q3 FY25 earnings call

Call held 11 Feb 2025

Management summary

JK Lakshmi Cement reported an improving demand and pricing environment from December 2024, with Q4 FY25 consolidated volume growth projected at 7-8%. The company achieved a significant QoQ cost reduction of approximately Rs.350 per ton in Q3 FY25 and launched a new brand, 'JK Lakshmi Green Plus,' targeting a price positioning improvement of Rs.80-100 per ton. While capacity expansions at Surat and Durg/Prayagraj are progressing, some delays were noted due to external factors. Management expressed optimism for FY26 industry growth of 6-7%, with JK Lakshmi aiming for 8-10% growth.

Highlights

  • Demand started improving from December 2024, with prices also showing improvement.

  • Q4 FY25 consolidated volume growth is estimated to be 7-8%.

  • FY26 consolidated volume growth is projected to be 8-10%, exceeding the industry's 6-7% forecast.

  • A substantial QoQ cost reduction of approximately Rs.350 per ton was achieved in Q3 FY25.

  • The new 'JK Lakshmi Green Plus' brand, launched on January 14, 2025, aims to improve price positioning by Rs.80-100 per ton.

  • Renewable energy now constitutes 48% of the company's overall energy requirements.

Concerns

  • Delay in conveyor belt approval for the Durg plant due to pending government lease.

  • Surat expansion (0.8 MT) commissioning slightly delayed to March/mid-March 2025 due to equipment supply issues.

  • Potential for increased costs or challenges in retaining the Sirohi limestone mine post-2030 re-auction.

Key financials

  1. Udaipur Volumes 8.3 lakh tonnes
  2. Overall Capacity Utilization 68%
  3. RMC Cement Revenue ₹64 Cr
  4. Non-Cement Revenue ₹135 Cr
  5. Non-Cement EBITDA Margin 1%
  6. Renewable Energy Proportion 48%

What they filed

Q1 FY27: revenue up 9.4%, net profit down 28.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,234 1,497 1,898 1,741 1,532 +24%1,588 +6%1,902 +0%1,905 +9%
EBITDA81 199 351 311 208 +157%205 +3%275 −22%259 −17%
Net profit-31 75 175 150 81 +361%57 −24%125 −29%108 −28%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex ₹800 Cr
    • Standalone CAPEX ₹500 Cr
    • Udaipur CAPEX ₹300 Cr
    Rajesh Ravi: "For FY25 in the last call that you would be spending 900 crores you had guided, 500 crores at the standalone level, and 200 each at Udaipur and Northeast projects. So, where are going short on the expense?" Management: "500 is the standalone and about 300-odd would be, that question was for the standalone, 500 is standalone and 300 is for the Udaipur. So, total how much we are spending for this year?" Management: "800 crores."
  • Debt Gross ₹2,150 Cr · Net ₹1,750 Cr
    Management: "Standalone gross debt is 650 crores, 300 crores of cash, so net debt is 50 crores on standalone basis. On a consol basis, gross debt is 2,150, 400 is the cash, so 1750 is the net debt on consol basis."
  • M&A Udaipur Cement Works Limited Merger · Pending regulatory
    Management: "Yes, for merger, we already have the stock exchange, SEBI approval, we have approval from the NCLT and that might take about eight, nine months."

Guidance & targets

Volume

  • Industry Growth Volume · FY25 · High confidence 4-5%
    Going forward, what we at JK Lakshmi see is that this year the growth is going to be around 4% to 5%, somewhere around that, and next year FY26 may be around 6% to 7%. That is what we see.

    — Management

  • Industry Growth Volume · FY26 · High confidence 6-7%

    — Management

  • Consolidated Volume Growth Volume · Q4 FY25 · High confidence 7-8%
    Fourth quarter, our estimation is likely to grow at about 7% to 8% and we are going to be in alignment with that, right, 8% I would say.

    — Management

  • Consolidated Volume Growth Volume · FY26 · High confidence 8-10%
    I think we are going to do better because I think we have now Udaipur and Surat also in place. So, our growth is going to be better than industry.

    — Management

Capacity Utilization

  • Udaipur Capacity Utilization Capacity Utilization · FY26 · High confidence ~65%
    Going forward, definitely, as I said that next year is going to be good in terms of demand. So, we will achieve somewhere around 65% of capacity utilization in FY26 for Udaipur, right?

    — Management

Capex

  • Capex Spend Capex · FY26 · High confidence ~1,000 crores
    Yes, CAPEX we expect Next year to be about, as I mentioned in my last call also, this year in nine months, we already done about 250 crores, another 100 crores may come in the current quarter and then thereafter about 1,000 in the next FY26 and about 1,500 in FY27.

    — Management

  • Capex Spend Capex · FY27 · High confidence ~1,500 crores

    — Management

Capacity

  • Surat Capacity Commissioning (Phase 1) Capacity · March/mid-March 2025 · Medium confidence 0.8 MT
    So, as we said before, we are commissioning it in two phases. First phase is going to get commissioned in the month of March itself or February end, which is about half of the capacity about 0.8 million tons, and another rest of 0.6 million tons during around June 2025.

    — Management

  • Surat Capacity Commissioning (Phase 2) Capacity · June 2025 · Medium confidence 0.6 MT

    — Management

  • Durg & Prayagraj Clinker/Grinding Capacity · 1H FY27 · High confidence 2.3 MT clinker, 1.2 MT grinding
    Okay. Got it. Second, just on the timeline for the clinker and grinding in two phases, so the clinker 2.3 and 1.2 million grinding at Durg and Prayagraj that will be starting by 1H of FY27?

    — Management

  • Northeast Expansion Capacity · FY28 · High confidence 1,800 CAPEX expansion
    Okay. And the Northeast one, last time we said 1,800 CAPEX expansion. So, that will be starting in FY28? Yes it is what the timeline we have given as of today.

    — Management

Realization

  • Pricing Improvement Realization · Q4 FY25 vs Q3 FY25 average · High confidence Rs.75-100
    I would say definitely about Rs.75 to Rs.100.

    — Management

  • Price Positioning Improvement (Brand Rejuvenation) Realization · Going forward · High confidence Rs.80-100 per ton
    Exercise we have initiated from 15th of January, right? So, the brand recognition, the idea is to improve price positioning and perhaps I think that is going to give some good benefit in terms of at least improving our price positioning by Rs.80 to Rs.100 a ton.

    — Management

Profitability

  • EBITDA per ton (sustainable) Profitability · Sustainable basis · Medium confidence 800-900+
    So, is it fair to say that easily we can see 800, 900 plus kind of EBITDA per ton on a sustainable basis? I think you are very quick in calculations. See, we are in the market and market is always dynamics, right? So, maybe I think why we should limit ourselves to only 75 to 100, we can go even up to 200 or maybe 50 also. So, I think some amount of volatility has to be there. So, I think I would give a range. I think you are right in that sense.

    — Management

Cost

  • Cost Reduction Initiatives Cost · Ongoing · High confidence 75-80% achieved
    So, I think this improvement or cost efficiency is an ongoing process. Plan we had I think more or less we have achieved I would say to the extent of about 75%, 80%.

    — Management

Sustainability

  • Carbon Net Zero Sustainability · by 2047 · High confidence Net Zero
    So, this is one area which we are very focused based on our corporate responsibility also as to how we are going to be carbon net zero by 2047.

    — Management

M&A

  • Udaipur Cement Merger Completion M&A · from NCLT approval · High confidence 8-9 months
    Yes, for merger, we already have the stock exchange, SEBI approval, we have approval from the NCLT and that might take about eight, nine months.

    — Management

What to watch in Q4 FY25

Durg Conveyor Belt Approval

Current quarter (Q4 FY25)
Current Final stages of approval, awaiting government lease
Target Approval secured

Why it matters

Completion of this project is important for operational efficiency and cost savings.

Management: "So, the status, this is on the final stages of approval. So, that taking lease from the PSUs or the government is little bit tedious, so, we are trying for that and hopefully during this current quarter, we will be able to accomplish this approval."

Risks & concerns

  • Delay in Durg conveyor belt approval

    medium

    Approval is in final stages but awaiting government lease, making timeline uncertain.

    Management acknowledged

  • Delay in Surat capacity commissioning

    medium

    Phase 1 (0.8 MT) delayed to March/mid-March 2025 due to equipment supply issues.

    Management acknowledged

  • Sirohi limestone reserve re-auction post-2030

    medium

    Potential for increased costs or challenges in retaining the mine, though backup plans are being explored.

    Analyst acknowledged

  • Competitive pricing pressure during lean demand

    medium

    Prices could face pressure during monsoon or periods of low demand, as seen in Q2 FY25.

    Management acknowledged

Q&A highlights

6 direct
Conveyor belt project at Durg plant Partial
So, the status, this is on the final stages of approval. So, that taking lease from the PSUs or the government is little bit tedious, so, we are trying for that and hopefully during this current quarter, we will be able to accomplish this approval.

Analyst inquired about the status and timeline of a key infrastructure project, revealing delays due to government approvals.

Asked by Praveen from Anandam Enterprises

Udaipur unit volume growth and utilization Direct
Udaipur Cement Works, I think we are going ahead as per the plan only in terms of volume ramp up. So, last quarter, if you look at, the capacity utilization was 57% along with a new unit, right, which is as per the plan which we had head-out. Going forward, definitely, as I said that next year is going to be good in terms of demand. So, we will achieve somewhere around 65% of capacity utilization in FY26 for Udaipur, right?

Clarification on the ramp-up and expected utilization for the newly commissioned Udaipur unit, addressing concerns about its contribution to overall volume growth.

Asked by Mangesh Bhadang from Centrum Broking

CAPEX numbers for FY25, FY26, and FY27 Direct
Yes, CAPEX we expect Next year to be about, as I mentioned in my last call also, this year in nine months, we already done about 250 crores, another 100 crores may come in the current quarter and then thereafter about 1,000 in the next FY26 and about 1,500 in FY27.

Provided clear guidance on future capital expenditure plans, crucial for understanding growth investments.

Asked by Rajesh Ravi from HDFC Securities

Delay in Surat expansion commissioning Direct
I think first phase was about to be commissioned during this time only. Yes, there is some delay because of some of the equipments which got delayed in terms of getting supplies at the site. So, yes, little bit of delays, but not much because anyway I think we are hopeful that by this month end or maybe mid of March I think 0.8 million tons will be up.

Confirmed a slight delay in the Surat capacity commissioning due to equipment supply issues, impacting the immediate capacity addition timeline.

Asked by Shravan Shah from Dolat Capital

Sirohi limestone reserve expiry and backup plan Direct
Yes. So, I think auction is due in the year 2030 and this is the case for Sirohi and this is the case for some other locations for other companies as well, right? So, we definitely want to retain this during re-auction also for sure. That may entail to kind of increasing cost of it because in the re-auction what will happen I think that we need to see. And parallelly, we are also trying because we do have that limestone reserve at other places, but I think Udaipur and Nagar also, we have taken that...

Addressed long-term raw material security concerns for the Sirohi plant, outlining plans for re-auction and exploring alternative reserves.

Asked by Amit Murarka from Axis Capital

Premium cement volume share decline Direct
I think our premium share in the case of East is not very good. And as I said that we are also working on streamlining our brand and changing the positioning also, right. So, that had some impact on this. Yes, your observation is right. But perhaps I think in coming quarter, we are going to go back to the same level because what we have done is in East also we have done some kind of brand restructuring, just to let you, we have Pro+ as a premium product here in this part of India, there we have the base product.

Explained the reason for the observed decline in premium cement share, linking it to brand restructuring and expressing confidence in recovery.

Asked by Rajesh Ravi from HDFC Securities

Udaipur Cement merger timeline Direct
Yes, for merger, we already have the stock exchange, SEBI approval, we have approval from the NCLT and that might take about eight, nine months.

Provided a clear timeline for the completion of the Udaipur Cement merger, indicating significant progress in the corporate restructuring.

Asked by Amit Murarka from Axis Capital

Comparison of profitability with peers Partial
So, we have definitely bridged that gap, Vaibhav, you know that and all of you because you track each and every company very closely. So, we have done a substantial job over the last couple of years, there's no doubt about it and that is also reflected in the gap which we have with our peer group. Now one thing I would definitely want to request all of you, when you compare our result with others, I think let's compare like-to-like, grey cement versus grey cement.

Management asserted that the profitability gap with peers has been bridged, emphasizing the need for like-to-like comparisons (grey cement vs. grey cement).

Asked by Vaibhav Agarwal from PhillipCapital (India) Private Limited

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Detailed narrative

Q3 FY25 Performance and Market Outlook

JK Lakshmi Cement observed an improvement in demand and pricing from December 2024, particularly in its operating markets. Management anticipates a consolidated volume growth of 7-8% for Q4 FY25. For the full FY25, industry growth is projected at 4-5%, accelerating to 6-7% in FY26, with JK Lakshmi aiming to outperform the industry at 8-10% growth. The company also achieved a significant QoQ cost reduction of approximately Rs.350 per ton in Q3 FY25, contributing to improved profitability.

Capacity Expansion and Utilization

The company provided updates on its capacity expansion projects. The Surat expansion, totaling 1.35 MT, is expected to commission 0.8 MT by March/mid-March 2025, with the remaining 0.6 MT by June 2025, noting a slight delay due to equipment supplies. The Durg and Prayagraj clinker and grinding units (2.3 MT clinker, 1.2 MT grinding) are slated for 1H FY27, while a Northeast expansion is planned for FY28. In Q3 FY25, Udaipur Cement Works operated at 57% utilization, with JK Lakshmi Cement at 78%, leading to an overall utilization of 68%.

Capital Expenditure Plans

JK Lakshmi Cement has outlined substantial CAPEX plans for the coming years. The total CAPEX for FY25 is guided at 800 crores, comprising 500 crores for standalone operations and 300 crores for Udaipur. Looking ahead, the company expects CAPEX to be around 1,000 crores for FY26 and approximately 1,500 crores for FY27, indicating a strong focus on growth and capacity enhancement.

Debt Position and Financial Health

The company's debt profile was detailed, showing a standalone gross debt of 650 crores and cash of 300 crores, resulting in a net debt of 50 crores. On a consolidated basis, gross debt stood at 2,150 crores with 400 crores in cash, leading to a consolidated net debt of 1,750 crores. Management did not discuss specific refinancing actions or cost of debt but provided a clear snapshot of the current debt levels.

Strategic Initiatives and Brand Rejuvenation

JK Lakshmi Cement is actively pursuing strategic initiatives to enhance efficiency and market positioning. The company launched a new brand, 'JK Lakshmi Green Plus,' on January 14, 2025, as part of a brand rejuvenation exercise aimed at improving price positioning by Rs.80-100 per ton. Furthermore, the company's renewable energy proportion reached 48% in the last quarter, aligning with its long-term goal of achieving carbon net-zero by 2047.

Udaipur Cement Merger and Raw Material Security

The merger of Udaipur Cement with JK Lakshmi Cement is progressing, with stock exchange and SEBI approvals secured, and NCLT approval expected to finalize the merger in 8-9 months. Addressing raw material security, management acknowledged the Sirohi limestone reserve auction due in 2030 and expressed intent to retain it, while also exploring other limestone reserves like Udaipur as a backup, indicating proactive management of long-term resource needs.

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