Target: ₹872
CMP: ₹719.10
We maintain our Buy rating on JK Lakshmi (JKLC) with an unchanged target price of ₹872/share (9x FY27E consolidated EBITDA), post our interaction with the management.
After a flattish FY25, we estimate JKLC’s volume growth to accelerate to 9 per cent CAGR during FY25-27E on the ramp-up of its north expansion. The company has launched a brand enhancement exercise and is also beefing up its green energy infrastructure along with a further reduction in lead distance. Falling fuel prices are also expected to further cushion the margin compression (from poor pricing) in FY25 and add to margin recovery from FY26 onwards.
Subsequently, we estimate unit EBITDA to rebound from a six-year low of ₹648 per MT in FY25E to ₹863/968 per MT in FY26/27E. Ongoing expansions should lead to consolidated capacity increasing to 22.5 mn MT by FY28 (from 16.5 mn MT in FY24). JKLC maintained its capex outgo guidance of ₹800/1,000/1,500 crore in FY25/26/27E towards these expansions.
Furthermore, we estimate its consolidated net debt to EBITDA to cool off to remain under 2x during FY26/27E. We currently value the company at 9x its FY27E consolidated EBITDA.
