Choice Institutional Equities has lowered its price target for JK Lakshmi Cement to Rs 640, citing rising fuel costs and a reduction in long-term capacity plans. The brokerage retains a 'Buy' rating, but investors should focus on the firm's rising debt levels and recent pressure on profit margins.
Choice Institutional Equities has revised its outlook for JK Lakshmi Cement, lowering the stock's price target to Rs 640. While the brokerage maintains a 'Buy' rating on the company, the adjustment reflects growing concerns over operational challenges and a recalibration of future growth plans.
The brokerage action comes on the heels of a difficult second quarter for the cement manufacturer. JK Lakshmi Cement reported a sharp decline in net profit for the quarter ended September 2026, with profits falling approximately 75% year-on-year to between Rs 20.43 crore and Rs 20.88 crore. This significant drop in profitability highlights the impact of persistent margin pressure, largely driven by elevated fuel costs that have weighed on operating expenses across the cement sector.
Management has also decided to moderate its long-term growth strategy. The company has revised its FY30 capacity target to 25 million tonnes per annum (MTPA), down from the previously projected 30 MTPA. For investors, this shift indicates a more cautious approach to capital spending in the coming years. While this might help in managing cash flow, it also suggests a slower pace of volume growth compared to earlier market expectations.
A key area for shareholders to monitor is the company’s balance sheet health. Net debt has risen to Rs 2,027 crore as of September 30, 2026, compared to Rs 1,266 crore in March 2026. This increase in debt is primarily linked to the ongoing spending on expansion projects. As the company continues its capital-intensive work, the ability to manage this debt load while maintaining margins will be a crucial factor for financial stability.
The outlook for the remainder of the fiscal year remains closely tied to energy prices. Analysts expect fuel costs to stay elevated, which may continue to challenge operating margins throughout the second half of FY27. Factors that could help offset these pressures include improved product prices, a higher contribution from renewable energy sources in the power mix, and efforts to reduce costs associated with plant maintenance.
Moving forward, investors may track whether the company can successfully navigate these cost pressures while balancing its debt obligations. The timing of capacity utilization, future fuel price trends, and the actual impact of the revised expansion plan on the company’s cash flow will be important indicators for assessing the stock’s performance in the coming quarters.