JSW Cement Limited analyst Q&A

Thank you. We will now begin the question and answer session. Our first question comes from the line of Rajesh Ravi from HDFC Securities.

Congrats on good set of numbers. Sir, my first question pertains to, you mentioned non -trade prices have improved and expectations of trade prices recovery. What is the overall demand traction in Q4 that you are witnessing across your market o f operations? How is the demand traction stepping up in Q4? How has been January in terms of industry level growth?

So we are expecting a very healthy growth in terms of the infrastructure and housing demand in the South. The payments fr om the government departments also have been released in the month of October and November, which has given a lot of speed to the kind of projects, which are going on, be it infrastructure projects, be it road projects. All these payments have been releas ed by the government department. And so, we are expecting a very healthy demand from all these sectors. In fact, a lot of parts of South were also affected due to this intermittent rains in the month of October and November, which had not caught up speed for the projects. But in the month of December, we have seen a healthy trend. January has been much better, both in terms of prices and demand, and we are expecting this to go on in quarter 4 also.

And a few more questions. On the GGBS, we hav e seen steel prices witnessing a sharp recovery in December onwards. How does that impact your margins in the GGBS positively, negatively? What is the thoughts over there?

Sorry, we didn't catch your question, Rajesh. Can you repeat that, please?

Yes. GGBS, with the steel prices shooting up 10% to 14% in this quarter, fourth quarter, December and January, we have seen strong price uptick. What is your thought on the GGBS profitability? How is that -- how does that move along with steel prices?

No, no, GGBS and steel, I mean, we have a long -term contract (for slag sourcing) and the annual pricing is linked to the wholesale price index of slag cement. So we are not impacted. Steel prices can move wherever. But for us, the price is locked unless there is a price escalation attributed to wholesale price index.

So even your selling price do not change materially with steel prices movement, right?

No.

And given the…

And price is a good thing.

Yes, right. And given that the prices -- if steel prices were to remain steady at the highest side that we are seeing currently, are there a potential of the next year's prices to slag GGBS going up?

No. In fa ct, due to the rising demand in the infrastructure segment and with this recent announcement of a lot of packages of high-speed rail coming up, we are seeing a lot of activity in terms of construction in the railway segment, where there is a good demand fo r GGBS and PSC cement. So these are the -- that may, in fact, help us in marginal improvement of GGBS prices for the coming year.

Understood. And sir, in GGBS, until your next expansion, what is the growth opportunity you have available until you reach full utilization?

This is likely to continue. This kind of growth is likely to continue. It all depends on which area. We are seeing a very healthy demand in the West with a huge number of infra projects being announced in particularly MMR region, we are seeing a healthy demand here. We are also seeing a very healthy demand in Telangana and Andhra Pradesh areas with this continuation of this Capital Region Development Authority projects. We are seeing a healthy demand in both AP, Telangana as well as in case of MMR region.

And lastly, on the cement business, your -- the North plant is -- Phase 1 is on the verge of getting commissioned. So what sort of market seeding we are already doing that? And what is the thought process for FY '27 in terms of volumes and in terms of trade, non -trade mix on the first 2 years? Any direction on the same?

To answer your first question, we are not doing any kind of seeding over there, unless and until we get our own clinker, we are not going to put our product in the marketplace. And trade and non-trade demand will depend on -- the projections will depend on the kind of demand we generate in that area.

We have added a significant amount of network al ready onboarded, Rajesh, which has already come on stream. So they've already signed up with us. So there's a very healthy interest across the geography. Last count, I think we had already crossed 500 channel partners and close to around 37 MMC agents in the direct segment. So we're seeing a good amount of traction in terms of interest for us. And as Jariwala mentioned, only when we get our own clinker, which is just around the corner, we'll make the cement and that's when we enter the market.

One last clarification…

Sorry to interrupt Rajesh. I would request you to rejoin the queue.

I'll just complete my…

We move on to the next participant. That's Rashi Chopra from Citi Group.

No, there is no change in that strategy. We would maintain that strategy of maintaining healthy realizations for GGBS segment, ma'am.

See the thrust is on improving the -- increasing the volumes. So we feel unless there is a drastic change in prices of OPC, we will continue to maintain the same prices.

And against that, I know you don't give the split between cement profitability and GGBS profitability, but is it safe to assume that given that GGBS pricing has more or less been stable and slag prices don't really change for you, the profitability should also have been mostly stable for GGBS and probably corrected a bit for cement in this quarter sequentially?

Yes, you are right.

And then on the -- I think th e last time around, you've spoken about your cost improvement, which was INR200 still pending for cement and about INR35-odd for GGBS. Any update on that, please?

Yes. Rashi, we are progressing on all the levers. So as we've noted in our presentation, lead has reduced during the quarter. We have also commissioned some RE capacity, which has increased our RE share as well Q -on-Q. So I think it would be best for us to update you in the next quarter because it's -- we calculate that cost savin g on an annualized basis. But we have made progress on the remaining INR200 per ton saving as well.

And sorry, just one last question. In the 9 months, could you share the regional growth trends for your volume side between Southeast and West for the third quarter?

Except for Bihar, South Tamil Nadu and South Kerala from where we have strategically withdrawn from a few markets. All other markets, we have grown. We've grown in the East, we've grown in the South, and we've been stable in the West because we don't operate in many areas in the West. We will be -- we are more or less stable in the West.

This is for the 9 months?

This is for the 9 months.

Our next question comes from the line of Siddharth Mehrotra from Kotak Securities.

Congratulations on a good set of results. I wanted to know what sort of volume guidance are you sort of building in given the fact that our major North capacity sort of slated to come online this quarter. So on a blended basis, perhaps if you could sort of give us some guidance and color on regional volume growth for next year, that would be helpful, sir?

So the target continues to be a volume growth of mid -teens, probably hi gh teens. That's the target, and that's the guidance probably we'll be giving for the next year also. But let's wait for the performance for this year get over. We are seeing very healthy improvement in volumes, and we are hopeful we'll continue to grow at this pace. And this when I say mid -teens, high teens, I'm not factoring in the North into this. This is excluding North will be over and above this number.

Secondly, sir, I wanted to understand what is the strategic intent behind us se tting up this grinding facility in UAE. So what I understand our clinker is in a JV held in that geography. So I mean, we were supposed to service Dolvi from UAE. So with this new capacity coming up, what sort of time lines are we looking at, number one? A nd number two, why the strategic shift in terms of clinker utilization within UAE itself? What happens to Dolvi clinker now?

No. So our current capacity in Fujairah clinker capacity, we are producing about 2.7 million tons a year. And this grinding unit is going to be 1.65 million. At let's say, 80%, 85% utilization, we are looking at 1.45 million to 1.5 million clinker requirement for this grinding unit. So we still have 1 million plus to feed into Dolvi, and that would continue. Dolvi requirement will be around that number only for a couple of years more. Now regarding the rationale behind it, one, this plant will be coming up within 12 months. It's a very short construction period. So it should be up and running by April 27. And today, as you might be knowing, the market in UAE has been very hot last year or so. And the industry expects this to continue for next 5 to 7 years just because of all the construction activity that is happening in UAE, primarily Dubai, Ras Al Khaimah, Abu Dhabi. Kuwait is on a rebuilding phase or building phase after 1991 war. So there is a very, very active interest from all our current customers if we can feed them cement. And most of the large builders out there, without naming any, I have met three of them, they are willing to do a long -term agreements with us for cement supplies or concrete supplies. So we feel this is a very attractive business opportunity and hence, the rationale behind putting up this unit.

Just one small clarification . This plant is fully owned. Your clinker plant will continue to be owned in a JV. Is that understanding correct, say for the next 2, 3 years?

Yes, correct.

Thank you. The next question comes from the line of Prateek Kumar from Jefferies Group.

Hello. Yes, good mornings. C ongrats for good results. Sir, my first question is on your North operations. When you say that you onboarded channel partners, so are some of these channel partners, your steel business partners o r these are like some of the other competition cement partners, who have like now come with you?

See, the majority of the dealers that we have appointed or we are on the process of appointing in the North, be it in Rajasthan or Haryana, they happen to be core cement and paint dealers, cement, paint and hardware dealers. But we are surely getting a lot of support from the steel dealers that are there in our system. We are getting a lot of support from them also. But the total number as of now who have been onboarded is low. So it is majority of the dealers, like I would like to say, close to about 90% of the dealers, 95% of the dealers are core cement dealers who are operating with other brands also.

Sir, does that answer your question?

Yes, that does. Also now into FY '27, what is your expectation for…

Can you repeat, Prateek, please? We couldn't hear you.

Yes. I'm saying that what is the outlook for volumes in the year 1 from the North operation?

So we expect about 50%, 55% utilization in the first year and this will gradually go up.

One separate question on GGBS. While we have been saying that the prices are expected to be stable, there is a mild dilut ion Q-on-Q again. Last quarter, you said that there is a change in customer mix and that has reflected in this. What is the specific reason here?

No, the only reason is we are running short of slag in Dolvi today. And we even have to move slag from Vijayanagar to Salem. That number is up in the current quarter. So this is a very good position situation to be in, wherein we have almost exhausted all the slag that's available in Dolvi. And it would continue this way for another year or so unti l the next blast furnace is up and operational within the next few months. So it's only the cost, which is impacting us because of the way we have started distributing the GGBS. There is no change in strategy.

It's a geography mix change.

Yes, it is only a geo mix change, nothing else.

The next question comes from the line of Shrey Mehta from Goldman Sachs.

Congratulations on a great set of results. Sir, just a clarification. When we say that we aim for mid-teen to high -teen growth, excluding the North expansion, is it fair to assume that the cement segment should be growing in tandem with the industry growth as we understand that GGBS will continue to grow in high teens?

We are targeting growth for both cement and GGBS. In fact, GGBS, we are targeting a much higher growth because of the acceptance in larger market segments. But yes, cement, we would like to get it in line with whatever we are doing as per the industry. We will defin itely outperform the industry.

And sir, with Nagaur expansion coming in Q4 and Punjab grinding unit and the Phase II coming somewhere in FY '27, '28, do you see any competitive intensity increasing in the Northern region considering that bulk of capacities are lined up in the next 12 to 15 months?

See, if you go through the kind of projects coming up in Rajasthan and Haryana and the NCR region, any kind of capacity coming there will definitely be consumed and absorbed in thos e markets. Additional capacities will definitely not be sufficient to cater to the kind of demand coming up over the next 2, 3 years.

The next question comes from the line of Kunal Shah from DAM Capital.

Congratulations on the perfor mance. Sir, first question is on the non -trade pricing levels in South, right, the kind of levels we have seen during the third quarter. Now would it be fair to assume that the OPC and GGBS mix during 3Q was at par or more expensive than the traditional mix at the RMC level?

See, people are accepting GGBS at a particular price. Whatever pricing levels we have maintained, people are accepting at that. And we don't see any kind of threat with the ups and downs in the cement prices in non -trade segment. Though in the beginning of January, we've seen a little bit of improvement in the non -trade prices across all territories in South and marginally in the West. But that normally doesn't affect us because everywhere it is -- majority of the places, the mixes are prescribed.

Just to weigh in, typically, as Jariwala mentioned, the customers operate on a design mix. They don't change it that often because they do the entire testing process all over again in th e source team. So the increase in January, while it would have been a little more favorable in December, but I think it's back to being more favorable in terms of the design mix than the traditional mixes.

No, sir, what was interesting was despite the kind of cement pricing we've seen and even if the mix was at par, you're still able to get a 17% sort of a volume growth. So my question was just more related to the product. Like is it now entering into that stickiness phase wherein customers are even willing to pay that marginal premium or even at par at the RMC? I mean, I was just referring more towards that?

We believe so, Kunal. We actually believe so. But I would like to see this play out for a couple more quarters. The hard w ork put in by the technical teams around trying to emphasize the green properties of GGBS and the quality of the concrete that gets made is nevertheless. So we keep doing more and more of it. So we believe that's what is causing it. I think the proof of t he pudding would be once we see the performance in quarter 4 and there on, I think that's when we can probably authoritatively say that, yes, it's a stickiness factor, which is driving this.

Understood. And just a follow -up on this, just trying to dissect it further. Now this 17% growth, like could you touch upon whether the underlying RMC demand was also this strong or the GGBS penetration within the RMC TAM is improving? I mean, I'm just trying to understand on the penetration levels here?

Definitely, the penetration levels have increased. We have reached a much larger number of customers in the last quarter and the quarter before that. We have seen a very, very healthy acceptance by both RMC and new infrastructure projects across our operating markets.

The next question comes from the line of Shravan Shah from Dolat Capital.

Sir, for capex for FY '26, so INR1,455 crores we have done in 9 months. Last time we said INR2,300 crores for '26 and INR2,000 crores for FY '27. So if you can again specify and even possibly for FY '28 also, if you can broader range would be helpful.

No, for next year, that is FY '27, we would be spending about INR2,000-odd crores. And for FY '28 also, the number w ould be somewhat similar. And '26 about INR2,300 crores is what we are going to end up spending. So if you look even at the start of the -- a few months back, we had given a guidance that we will be spending about INR7,300-odd crores to complete all our projects. So -- and we have just one addition into that, that's be Fujairah grinding unit. That's about $39 million. So adding up all of these, I think we should be spending about INR2,300 crores this year, INR2,000 crores and INR2,000 crores in the followi ng 2 years. That should be sufficient to complete all the projects.

So for Nagaur, the -- by March, how much -- or maybe till December, how much we have already spent?

Just one sec. INR2,700-odd crores has been spent.

I didn't hear, sir.

About INR2,700 crores has been spent till December.

Okay. Out of INR3,350-odd crores.

Correct. Because the project is nearing completion. It's only some payments which are pending.

So I think the additional 1 million should be up and running bef ore September current year. That is FY '27. Yes. Regarding Punjab, we are just awaiting the ECs and all. Any time they are there, we should be starting the work because the land is in control with us. A nd from then, it shouldn't be more than 18 months. Of course, our target would be 15 months.

And the Vijayanagar and Dolvi, 2 million Vijayanagar and 4 million Dolvi, when it will be coming?

So we are going to start them both the projects in FY '27. In the next call, we should be updating you.

And lastly, sir, is it possible to share the RMC revenue and the clinker revenue for third quarter FY '26 Y-o-Y, Q-o-Q and 9 months also would be helpful?

RMC during the quarter, we have done about INR168 crores revenue.

INR168 crores in third quarter?

Yes, in third quarter.

And clinker revenue, sir?

Clinker revenue is about INR36 crores.

INR36 crores. And is it possible for Q -o-Q, Y -o-Y and 9 months, if you can share the numbers?

We'll share it with you, Shravan offline.

We take the next question from the line of Navin Sahadeo from ICICI Securities.

Just a couple of clarifications. In your opening comments, the management said clinker utilization is almost 95%, 96%, if I heard that correct. And so is it only for the Indian market or the India-based clinker capacity that we are talking about becau se you also said that cement volumes without Nagaur can continue to grow in double -digit rather mid -teens, as you said. Just wanted to understand that?

You're right. The Nandyal and Shiva that's India operations only is at 96%. As regards Fujairah, that operates at more than 100%. So -- but we have not considered in this calculation of 96%.

Of course. So if it's already -- the domestic capacity is at 96%, are we banking on a significant increase in blending for the cement volumes to grow in double digits?

It is both. Currently, we are selling some clinker. This number of INR36 crores revenue, which I mentioned, that is the clinker sold to third parties. That will go off, which we are expecting in this March itse lf. So that clinker would be available. And of course, the product mix would change.

And this purchase of stock in trade, which is there in the P&L, is this purchase of clinker from Fujairah unit?

This is more of slag that we purchased recently.

That is slag. That is not clinker purchased from Fujairah.

A very small volume of clinker.

Understood. And just one more question, if I may. You mentioned 2.5 million ton grinding in Nagaur coming in Q4, but there is -- and Punjab, you said it's awaiting EC and 15 to 18 months thereafter. But what about the 1 million ton additional grinding unit in North? What is the -- is that -- is it at the same location? And what is the timeline for that?

Same location. And as I mentioned, that would come up by September '26.

We take the next question from the line of Jain Nayanbhatia, an Individual Investor.

Congratulations on the good numbers. I hope you are able to hear me.

Yes.

Just ask you about Shiva Cement or is a separate con-call has been scheduled for the same?

No, there's no separate call for Shiva.

So we can ask right?

Yes, you can go ahead.

Sir, I'm sorry to interrupt, Jain, you are not audible. Could you please change your location? Your voice is breaking.

Am I now audible?

Yes, go ahead, Jain, please.

Yes. N ow I just wanted to ask you about the grinding capacity that has come up in Shiva. What is the breakup of the revenue of clinker and cement in Shiva Cement?

Just one second. For cement, the revenue is about INR14 crores for the quarter. And clinker is INR112 crores.

Just a basic follow-up. What is your green energy target for next year? There are 25%...

Yes. 63% is the overall targe t. And hopefully, this should be up and running by this March. We may slip very small capacities into the next financial, but the target continues to be 63% of the overall in the existing operations, excluding North. North will be a much higher number.

And in this quarter, what was the percentage of the premium cement?

It was 60%.

We take the next question from the line of Rajesh Ravi from HDFC Securities.

My questions have been answered.

The next question comes from the line of Shravan Shah from Dolat Capital.

Yes. Sir, just a couple of c larifications. When we said INR 7,300 crores is the total capex, so this is still 33.85 MTPA, which as per the presentation is by CY '28, we are planning to start or if you can specify?

Yes, that's right. It's up to calendar year '28.

By MTPA this is the -- INR7,300 crores is the total capex.

Yes. So for the first leg, as we've given in our presentation, so it's about 33.85 million, right, as per our presentation, it's up to that.

And sir, is it possible to break it down the current 21.6 MTPA capacity? Out of that, how much is for GGBS and how much is for cement?

No, the capacity is fungible. The same grinding unit can grind slag and it can grind clinker as well. So there is no specific capacity split as such.

The next question comes from the line of Navin Sahadeo from ICICI Securities.

My question was regarding this UAE facility. So you said it operates at 100% utilization, but entire volume is sold in that region only. We don't intend to bring it here because I thought initially maybe that was the plan to have those clinker imported on the West Coast and utilize it. So is it more remunerative there, and that's why we are not bringing it? Or how should one look at it from a volume addition to domestic growth point of view?

Navin, I'll break this up into how we sell -- what we sell there and what we bring into India. So our current capa city there production is about 2.75 million tonnes and Dolvi requires slightly less than 1 million tonnes at the moment. So whatever Dolvi needs, we bring it here. And the balance is sold domestically. Now today, we are selling clinker. It is more remunerative to sell cement because we have this surplus capacity, we thought we will put up a grinding unit to sell cement there. So what comes to Dolvi will continue to come. Dolvi's requirement would continue to be met from Fujairah.

And that cost is captured in purchase of trade -- stock in trade, right? Or in raw material?

That's in raw material.

Then my second question was on the GGBS front. So I think in the previous calls, you said because OPC prices were a little soft, that is why GGBS prices were a little under pressure. But in this quarter, then we saw a significant -- like your numbers itself are like a 4% sort of a decline, but GGBS has not seen a major decline as such. So is it fair to assume that the GGBS price because there is some improvement now in the March quarter, as we speak, as you said. So is it fair to assume that GGBS prices also have bottomed out and here to stay? Or is there is more dynamic pricing to it? It competes with other additives? And if that is the case, then is it a project-based pricing? Is it like a contract -- 1-year contract, 3 -month contract? How does this pricing, it may -- if you could just help us understand.

The way we look at it is, we would like to hold on to the present levels of prices. But definitely, as you said, if any project is there of national importance, then we tie up with the respective contractor or the company to give them a long -term perspective or commitment on the price. But our strategy holds. We would like to maintain the prices or, in fact, go up but not go down.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing remarks.

Thank you, everyone, for taking time to join our call. And we look forward to staying engaged, and you can obviously reach out to us if there are any further questions. Thank you, and good morning to everyone.

Thank you, sir. Ladies and gentlemen, on behalf of JM Financial, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.