Axis Securities has reiterated a 'BUY' rating for the cement company despite a Q2FY27 earnings miss, where the company reported a net loss of Rs 207 crore. The firm cut its target price to Rs 2,045, citing operational headwinds and integration costs from acquired assets. While the quarterly performance lagged behind expectations due to soft volume growth and higher fixed costs, the broker remains optimistic about the company's long-term potential as capacity scales to 67 MTPA.
Axis Securities Retains BUY on Cement Major Post Q2 Miss
Net Loss: Rs 207 Crore | Target Price: Rs 2,045
Reader Takeaway: Long-term expansion into 67 MTPA capacity balances immediate headwinds from asset integration and elevated input costs.
What just happened
Axis Securities has maintained its 'BUY' rating on the cement player but revised its target price downward to Rs 2,045 from Rs 2,260. The revision follows a soft Q2FY27 performance where the company missed revenue and EBITDA estimates. The firm reported a net loss of Rs 207 crore, significantly impacted by an exceptional item of Rs 339 crore tied to recent asset acquisitions. EBITDA per tonne fell 34% sequentially to Rs 694.
Why this matters
The quarterly results reflect the operational challenges of integrating the Jaiprakash Associates cement assets. Fixed costs per tonne rose by approximately Rs 168 due to lower-than-anticipated production volumes and specific plant shutdown expenses. With EBITDA margins at 13.8%, the company faced pressure from both top-line performance and rising input costs, specifically international petcoke and crude oil prices.
Operational Performance
Despite the challenges, consolidated cement volumes grew 3% year-on-year to 7.1 million tonnes. Excluding Central India assets, the company saw an organic growth of 4%. Renewable energy adoption has reached 52% of total power requirements, providing a hedge against volatile conventional fuel costs.
What changes now
Management has shifted its strategic focus toward commissioning current projects and improving the return on invested capital. With the capacity expansion trajectory aimed at 67 MTPA, the company anticipates a stronger H2FY27, driven by normalized fixed costs and improved market realizations.
Risks to watch
Investors should remain cautious regarding execution risks associated with capacity expansion. The balance sheet is currently under pressure with net debt and leverage near peak levels due to recent acquisitions. Sustained pricing power and the ability to control input-cost inflation remain critical for the company to return to profitability in line with broker expectations.