Detailed Narrative
Q3 FY26 Performance and Realization Challenges
JK Lakshmi Cement reported a challenging Q3 FY26, marked by a sharp 9% sequential decline in overall realization. This was primarily attributed to a significant drop in non-trade prices following the GST reduction in September 2025, coupled with labor scarcity during the Diwali season and state elections. The company's trade share consequently decreased from 53% to 49%, as its newly commissioned Surat grinding station primarily caters to the non-trade heavy Gujarat market. Despite these headwinds, management expects a recovery in both trade and non-trade prices in Q4 FY26, with non-trade prices already showing an increase of ₹10-15 per unit in January.
Capacity Expansion and Capex Progress
The Durg Line-2 expansion project remains a key focus, with approximately ₹250-260 crores spent in Q3 FY26. The total capex for FY26 is projected to be around ₹650 crores, with a more substantial outlay of ₹1,600-1,700 crores targeted for FY27. The entire Durg project, including the conveyor belt component, is estimated at ₹3,000 crores and is slated for completion by March 2028, with phased commissioning of 2.2 MT by March 2027 and 2.4 MT by March 2028. Maintenance capex is maintained at ₹50 crores annually.
Cost Management and Productivity Initiatives
The company demonstrated efficiency gains in power costs, which decreased sequentially from ₹5.52 to ₹5.37 per unit. Fuel costs, specifically pet coke and coal, were reported at ₹1.56 per kilocalorie, but management anticipates an increase to ₹1.58-1.60 per kilocalorie in Q4 FY26, which will exert pressure on input costs. Employee expenses were noted at approximately ₹160 crores in Q3 FY26, with management emphasizing ongoing efforts to improve productivity across operations to stabilize these costs.
Non-Cement Business Development
The non-cement business contributed ₹147 crores to revenue in Q3 FY26, with Ready Mix Concrete (RMC) accounting for ₹67 crores and AAC blocks for ₹56 crores. This segment currently operates at a low EBITDA margin of around 4%. Management is actively working on enhancing productivity and focusing on value-added products within this segment. The strategic goal is to achieve a 'higher single limit' margin for the non-cement business within the next two years, although it is not expected to reach parity with cement margins.
Market Outlook and Strategic Focus
Looking ahead, JK Lakshmi Cement projects double-digit demand growth for Q4 FY26, which is expected to outpace the industry's estimated 7-8% growth. The company is strategically increasing its blended cement (PPC) ratio from 62% to 67% to optimize its clinker consumption ratio. Despite acknowledging market volatility🌐, management expressed confidence in improving pricing trends due to a combination of stronger demand and rising input costs. The company also aims to maintain its net debt to EBITDA ratio within the 3-3.5X range.
Conveyor Belt Project Delay
A significant concern highlighted was the stalled conveyor belt project for the Durg Line-2 expansion. This project, with an estimated expenditure of approximately ₹170 crores, is currently on hold due to unresolved land acquisition issues. The delay impacts the overall project timeline and could affect the operational efficiency of the Durg plant once commissioned. Management confirmed that this stalled component is included in the total Durg CAPEX figures.