JK Cement Ltd. share price target

ICICI Securities Ltd | Retail Equity Research JK Cement reported mixed set of numbers in Q3FY18. JK cement's revenues increased by 23.7% YoY to | 1,126.1 crore (above I-direct estimate of | 1,101.6 crore) mainly led by 30.0% YoY rise in grey cement revenues to | 773.3 crore (driven by higher volumes: up 21.7% YoY and increase in realisation: up 6.8% YoY). White cement revenues increased 16.0% YoY mainly led by 12.5% YoY growth in volumes. Blended EBITDA/tonne declined 17.1% YoY to | 733/tonne (below Idirect est: | 888/tonne). Grey cement EBITDA/t decreased 16.1% YoY to...

In-line Operating Performance; Capacity Expansion Plan Bodes Well J.K. Cement (JKC) has delivered an in-line performance in 3QFY18. Its reported EBITDA stood at Rs1.7bn (+15% YoY and -18% QoQ) mainly driven by strong volume growth. Operating cost/ tonne increased by 7% YoY and 2% QoQ mainly due to spike in Power & Fuel cost/tonne (+18% YoY and +3% QoQ) and freight cost/tonne (+20% YoY and +1% QoQ). Grey Cement EBITDA/ tonne stood at mere Rs390 vs. Rs452 and Rs547 in 3QFY17 and 2QFY18, respectively. Notably, average NCR stood at Rs3816/tonne (+7.5% YoY and -3.2% QoQ). Yearly improvement in realisation is primarily on account of exposure to Gujarat and Maharashtra markets. While...

Operational performance: Grey cement continued its strong volume growth (17% YoY and 3% QoQ) despite monsoon seasonally weak quarter). Average realization broadly flat QoQ at Rs 4,020/t. However, average cost/ton increased by Rs 230/ton due to high fuel and freight cost.

Sector: Cement /Small Cap | Earnings Update 2QFY18 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...

Volume growth above estimate: 2QFY18 revenue grew 20% YoY to INR11.1b (est. of INR9.9b). Grey cement volume rose 17% YoY to 1.93mt due to higher clinker exports to Nepal and strong growth in north due to market share gains (led by ramp-down of Binani Cement). White cement (incl. wall putty) volume rose 8.5% YoY to 0.30mt due to GST-led restocking and Katni unit ramp-up. Higher realizations drive margins: Grey cement realization rose 8% YoY (-1% QoQ) to INR3,943/ton due to better pricing in north. South realization declined 6% QoQ due to weak prices in Maharashtra. Blended realization rose 4% YoY...

ICICI Securities Ltd | Retail Equity Research JK Cement reported good set of numbers in Q2FY18. JK cement's revenues increased by 20.1% YoY to | 1,107.7 crore (above I-direct estimate of | 1,009.2 crore) mainly led by 26.3% YoY rise in grey cement revenues to | 759.8 crore (driven by higher volumes: up 17.0% YoY and increase in realisation: up 7.9% YoY). White cement revenues increased 7.0% YoY mainly led by 8.3 % YoY increase in volumes. Region-wise the company's northern region registered a grey cement...

Grey cement business at significant discount to peers JKCE's grey cement capacity of 10.5mt is available at 64-34% discount to peers, if we value the white cement business at 14-10x FY19E EV/EBITDA. While ~30% of JKCE's grey cement capacity is inefficient due to legacy designing issues and old plants, the management has been successful in diversifying to efficient assets by way of a new unit in Mangrol and split grinding unit in Haryana. In our view, despite its inefficient assets, the steep 34-64% discount is not warranted, as the residual assets are earning good profitability for the segment....

Grey cement blended volume increased 15% YoY despite company hiking grey cement prices since Apr'17. Average realization surged by Rs 320/t QoQ at Rs 4,060/ton due to strong cement prices in the North region.

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...

JK Cement's Q1FY18 results were broadly in line with our estimates. Revenues increased 16.4% YoY to | 1,041.5 crore (above I-direct estimate of | 983.0 crore) mainly led by 23.5% YoY rise in grey cement revenues to | 745.9 crore (driven by higher volumes: up 12.7% YoY and increase in realisation: up 9.6% YoY) EBITDA margin declined 55 bps YoY to 19.0% (vs. I-direct estimate of 19.0%) mainly led by higher power & fuel expenses (up 30.0% YoY led by higher pet coke prices) and rise in freight cost (up 27.7% YoY led by...