Sector Outlook: Positive
Additional capacities to fuel future performance
J.K. Cement Ltd. reported revenue of Rs. 28,080 million, down 9% QoQ but up 2% YoY. The company achieved an EBITDA of Rs. 4,860 million, down 13% QoQ but up 19% YoY, with margins at 17% compared to 14% last year. PAT was Rs. 1,850 million, down 15% QoQ but up 66% YoY, with an EPS of Rs. 23.9, up from Rs. 14.4 last year. Net sales realisation was Rs. 4,669 per tonne, down 5% QoQ and 6.6% YoY. Fuel cost per tonne decreased to Rs. 857, down 4.6% QoQ and 23% YoY due to lower pet coke prices. Green power mix improved to 57%. Logistics costs remained flat at Rs. 1,228 per tonne, with lead distance reduced to 415 km from 426 km last year. Capacity utilisation was 79%, with premium products making up 13% of total sales and a trade mix of 63% for the quarter ended June 2024.
Key Concall Highlights
- The company spent Rs. 125 crores on the Panna expansion project and Rs. 50 crores on regular capex. It plans to spend Rs. 1,900 crores in FY25 and Rs. 1,800 crores in FY26 on capital expenditure.
- A new 2 MT grinding unit was commissioned in Prayagraj in just 10 months. The company expects to add another 6 MT capacity by FY26.
- White cement prices have dropped due to competition from paint companies. While putty cement growth has favoured paint companies, J.K. Cement aims to match industry growth in white cement.
- A cost reduction program aims to cut operating costs by Rs. 150-200 per tonne, with a target of Rs. 75 per tonne reduction this year.
- The company aims to add Rs. 300 crores to revenue from the paints business this year, already earning Rs. 57 crores in the June 2024 quarter but expects a net loss of Rs. 40 crores from the paints segment.
- Industry prices were lower in the June 2024 quarter and are expected to drop further in Q2, but prices should recover from October, with rising demand from September.
- Power and fuel costs per Kcal decreased to Rs. 1.62 from Rs. 1.80 in the previous quarter.
- The company expects a 10% volume growth this year.
- Savings from green energy adoption are around Rs. 3 per unit. The company’s green power share is 57%, aiming to increase to 75% by FY30.
Valuation and Outlook
J.K. Cement Ltd. had a strong quarter despite weak demand due to intense heat, general elections, and lower consumption. Improved operational efficiency and lower input costs helped maintain consistent performance. The company’s capacity expansion plans and increasing use of green power are expected to boost its economic activities. Although the next quarter might be muted due to lower demand, reduced prices, and maintenance costs, demand is expected to pick up after the monsoon and during the festive season. This, along with increased capacities and better efficiencies, should drive growth from Q3 onwards. We remain positive about the company’s long-term growth prospects and will monitor management actions closely.
