JK Cement Ltd. share price target

Sector: Cement /Small Cap | Earnings Update 4QFY19 Background: JK Cements is one of the largest cement players in North India. It manufactures grey cement, white cement and white cement based wall putty. Currently the grey cement capacity is 10.5MTPA. Domestic white cement capacity is 0.6MTPA (second only to UltraTech). The company also manufacturers putty and has an installed capacity of 0.7MTPA. The company also has plants in Fujairah (UAE) with an installed capacity of 0.6MTPA (white cement) and 1.02MTPA (grey cement) in a 90:10 JV with the Government of Fujairah. It has also expanded its grey cement capacity by 3 MTPA through two split grinding units (1.5 MTPA each), one at Mangrol...

We reiterate BUY with a TP of Rs1,162 (10x FY21 consol EBITDA). Our TP implies EV/MT of USD 92. We continue to like JKCE owing to its large exposure to the lucrative white/putty business (55% of consol EBITDA) and JKCEs expanding grey cement capacity in the strong pricing north/central markets. Healthy cash generation should keep net D/E to remain at/below 1x and net debt/EBITDA below 3x despite ongoing expansions, in our view. We reiterate BUY with a TP of Rs1,162 (10x FY21 consol EBITDA). Our TP implies EV/MT of USD 92.

Expansion in full swing; to lead next phase of growth Due to clinker constraints in the north, topline growth in the north was somewhat restrained. To remove these bottlenecks, the management had announced capacity expansion plans. The new clinker line at Mangrol unit for a 7500 TPD capacity would be commissioned by September 2019. Additionally, the 1 MT each brownfield expansion at its Nimbahera and Mangrol grinding units would be commissioned in H1FY20E as well. Further, the greenfield GUs at Aligarh and Balasinor are expected to be completed in...

JK Lakshmi Cement (JKLC) reported Q3FY19 earnings below our estimates Change in Estimates | Target | Reco due to higher than expected costs. JKLC's investments in Waste Heat recovery (WHR) plant at Durg, Chhattisgarh unit and other cost rationalization...

Demand to outpace supply leading to improving utilisation Sustained infrastructure spends in low cost housing, roads along with a pickup in private capex are expected to further boost cement consumption. Though elections may cause a short-term blip, expenditure is expected to normalise in the peak quarters of Q4FY20E and Q1FY21E. Further, north (where JK Cement sells ~75% of volumes) is expected to witness limited capacity addition CAGR of 2.0% in FY18-20E while demand is expected to grow ~7-8% resulting in improving utilisation and pricing. Consequently, we expect revenues to increase at a CAGR of 9.9% in FY18-20E....

clinker) increased by 6% YoY to 2.14mt, while white cement volumes increased by 19% YoY to 0.35mt. Combined realizations stood at INR5,098/ton (flat QoQ, +5% YoY), in line with estimates. Revenue increased 13% YoY to INR12.7b, as against our estimate of INR12.4b. As a result, blended EBITDA/t increased +7% QoQ /15% YoY to INR843. EBITDA increased 24% QoQ/YoY to INR2.1b, with margins expanding 1.42pp YoY (+1.11pp QoQ) to 16.5%.

JK Cement's results were broadly in line with our estimates on the revenue front whereas EBITDA, PAT exceeded our expectations. Revenues remained flat YoY to | 1,100.6 crore (vs I-direct estimate: | 1,089.3 crore) with blended volumes falling 2.9% to 2.16 MT (vs. I-direct estimates of 2.25 MT). However, blended realisations improved 2.5% YoY (Grey: up 1.6% YoY, white: up 4% YoY) due to base impact and higher share of trade segment to total sales in our view Blended EBITDA/tonne declined 15.6% YoY to | 786/tonne (vs. I-direct...

6 November 2018 Grey cement volumes (incl. clinker) declined by 3% YoY to 1.87mt and white cement volumes by 2% YoY to 0.29mt in 2QFY19. Grey cement realizations stood at INR4,005/ton (+5% QoQ) and white cement realizations (incl. putty) at INR11,664 (+4% YoY; -1% QoQ). Revenue declined 1% YoY to INR11b in the quarter. QoQ (+6% YoY) to INR4,310 due to higher power & fuel cost/t (+5% QoQ) and other expenses/t (+12% QoQ), partly offset by lower freight cost/t (down 4% QoQ due to lower lead distance and higher direct dispatches). EBITDA declined 18% YoY (+13% QoQ) to INR1.7b, with the margin contracting 3.3pp YoY (+1.9pp QoQ) to 15.4%. Blended EBITDA/t declined 16% YoY (+21% QoQ) to INR786. Consequently, PAT declined by 26% YoY to INR647m in the quarter.

Sector: Cement /Small Cap | Earnings Update 1QFY19 Background: JK Cements is one of the largest cement players in North India. It manufactures grey cement, white cement and white cement based wall putty. Currently the grey cement capacity is 10.5MTPA. Domestic white cement capacity is 0.4MTPA (second only to UltraTech, which has capacity of 0.55MTPA). The company also manufacturers putty and has an installed capacity of 0.3MTPA. The company has also installed a grey cum white cement plant with an installed capacity of 0.6MTPA (white cement) and 1.02MTPA (grey cement) in Fujairah (UAE) in a 90:10 JV with the Government of Fujairah. It has also expanded its grey cement capacity by 3...