Axis Securities has kept a BUY rating on JK Lakshmi Cement but lowered its price target to Rs 660. The revision follows a Q2FY27 performance that missed analyst estimates, with net profit falling 75% YoY to Rs 21 crore. Despite near-term margin pressure due to higher input costs, the brokerage remains positive on the company's long-term growth driven by capacity expansion and management's focus on operational efficiency.
Axis Securities Retains BUY on JK Lakshmi Cement After Q2 Miss
Net Profit: Rs 21 Cr (Down 75% YoY)
Target Price: Rs 660 per share
Reader Takeaway: Capacity expansion and premium product mix drive long-term optimism, despite current margin compression from high fuel costs.
What just happened
JK Lakshmi Cement reported its Q2FY27 results, falling short of brokerage expectations across major profitability metrics. While net sales grew 6% YoY to Rs 1,617 crore, the company saw a significant contraction in profitability. EBITDA fell 26% to Rs 154 crore, and EBITDA margins compressed by 405 basis points to 9.5%. The resulting net profit stood at Rs 21 crore, representing a 75% decline compared to the same quarter last year.
Why this matters
The disappointing Q2 performance prompted Axis Securities to revise its earnings estimates downward for FY27 and FY28. Consequently, the firm adjusted its target price to Rs 660, down from its earlier target of Rs 730. Investors are currently weighing this immediate margin pressure against management's stated recovery plan for the second half of the fiscal year.
Performance Analysis
Sales volumes showed growth, reaching 2.99 mtpa, a 5% increase YoY. However, cost pressures hampered the bottom line. Input costs per tonne rose 5% to Rs 4,904, largely due to elevated power and fuel expenses. This led to a 29% decline in EBITDA per tonne, which settled at Rs 517 for the quarter.
Management Strategy
Management is targeting an EBITDA per tonne recovery to Rs 700+ in the coming periods. This strategy hinges on three levers: increased operating leverage, a higher contribution from renewable energy, and growing the premium cement product mix from 27% to 30%. The company remains committed to its growth trajectory, planning Rs 1,500 crore in capex for FY27, with major allocations toward the Durg project.
Risks to watch
The primary concerns remain high volatility in coal and petcoke prices, which directly impact margin stability. Additionally, the company faces operational risks regarding lower-than-anticipated realisations and potential delays in large-scale capacity expansion projects. The success of the current price hike cycle initiated in late 2024 will be a critical monitorable for near-term profitability.