JK Cement Ltd. share price target

JK Cement reported better-than-expected Q4FY20 numbers, beating our estimates on the operational front. Revenues broadly stayed flat YoY at | 1,477 crore (I-direct estimate: | 1,433 crore). Suspension of operations in end-March led to a 7.3% drop in volume YoY to 2.67 MT (in line with I-direct estimate). Blended realisations grew 6.8% YoY to | 5,533/t (I-direct estimate: | 5,393/t). Higher realisations drove EBITDA margin expansion of 470 bps YoY to 23.4% (I-direct estimate: 21.3%). EBITDA/t jumped 33.6% YoY to | 1,297/t (I-direct estimate: | 1,148/t); EBITDA increased 24% YoY to | 346...

Robust Performance on Steady Realisation & Cost Benefits JK Cement (JKCE) continued to report a strong set of numbers in 3QFY20 amid challenges as its reported EBITDA grew by a strong 42% YoY to Rs2.78bn broadly in-line with our estimate. Unitary EBITDA for grey cement stood at Rs770 vs. Rs433 in 3QFY19 and Rs824 in 2QFY20. While sales volume of grey cement, including clinker, grew by 3.5% YoY, average realisation came in at Rs4,355/tonne (+10% YoY and -2.5% QoQ) broadly in-line with our estimate. Operating cost/ tonne declined by 1.5% QoQ to Rs4,404 despite sequential rise in input cost. JKCE noted that continued high cost of fuel inventory from RIL did not let the benefit of lower fuel prices reflect in...

Robust Performance on Steady Realisation & Cost Benefits JK Cement (JKCE) continued to report a strong set of numbers in 3QFY20 amid challenges as its reported EBITDA grew by a strong 42% YoY to Rs2.78bn broadly in-line with our estimate. Unitary EBITDA for grey cement stood at Rs770 vs. Rs433 in 3QFY19 and Rs824 in 2QFY20. While sales volume of grey cement, including clinker, grew by 3.5% YoY, average realisation came in at Rs4,355/tonne (+10% YoY and -2.5% QoQ) broadly in-line with our estimate. Operating cost/ tonne declined by 1.5% QoQ to Rs4,404 despite sequential rise in input cost. JKCE noted that continued high cost of fuel inventory from RIL did not let the benefit of lower fuel prices reflect in...

We reiterate BUY with a higher TP of Rs 1,654, valuing it at 10x Sep'21E consol EBITDA (in-line its 5-yr mean multiple). We like the co for its increased presence in the robust north market (grey biz) and for its steady growth in the white/putty segment. Its balance sheet remains under control (net Debt/EBITDA at ~2x in FY21-22), despite its large capacity increase across both grey cement (+40% to 14.7mn MT) and putty (+33% to 1.2 mn MT) by FY21E. We reiterate BUY on JK Cement (JKCE) with a TP of Rs 1,654 (10x its consol Sep21E EBITDA: EV/MT of USD 120).

Ramping up of additional capacity to drive growth JK Cement, on a YTD basis, has commissioned grinding capacity totalling to 3.5 MT over three locations and 8000 TPD of clinker capacity. Clinker bottlenecks, which the company used to face during peak demand periods, would not be a concern with the commissioning of the additional clinker line at Mangrol. Another GU of 0.7 MT is expected to be commissioned in the coming March/April. With expectation of a cement demand revival in the upcoming financial year and elimination of clinker bottlenecks, JK Cement...

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...

Sector: Cement /Small Cap | Earnings Update 2QFY20 Background: JK Cements is one of the largest cement players in North India. It manufactures grey/ white cement and white cement based wall putty. Currently the grey cement capacity is 10.5MTPA while 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 estimate the co to deliver consolidated EBITDA/PAT CAGR of 22/35% during FY19-22E. We reiterate BUY with a higher TP of Rs 1,523 as we value its consol Sep'21E EBITDA at 10x and ascribe 50% value to its FY21/22E CWIP. The stock trades at attractive valuations of 9.0/8.4x FY21/22E EBIITDA and at EV of USD 100/MT. We reiterate BUY on JK Cement (JKCE) with a TP of Rs 1,523 (10x Sep21 consol EBITDA), implying EV USD 115/MT. We continue to like the co for its strengthening capability and strong presence in white/putty segment.

clinker) increased 2% YoY to 1.9mt (in-line), while white cement volumes were up 13% YoY to 0.33mt in 2QFY20. For 2H, we expect sales/EBITDA/PAT to (1) JKCE commissioned a 1mt grey cement grinding unit at Nimbahera and a 2.6mt grey clinker at Mangrol on 29 of cement grinding capacity will be commissioned soon. (2) Total amount JKCEs capacity expansion will reduce its proportion of inefficient assets. The company is expanding its putty capacity by 0.2-0.3mt by Jun20 at a capex of JKCEs capacity expansion will reduce its proportion of inefficient assets. We value JKCE on an SOTP basis (FY21E EV/EBITDA) 10x for white cement, 9x for grey cement and 6x for overseas (Fujairah) to arrive at a target price of INR1,370. We value JKCE on an SOTP basis (FY21E EV/EBITDA) 10x for white cement, 9x for grey cement and 6x for overseas (Fujairah) to arrive at a target price of INR1,370.

For Q2FY20, JK Cement reported a mixed set of numbers. Revenues were 14% higher YoY at | 1254.2 crore (vs. I-direct estimate of | 1,229 crore). This was driven mainly by 10% growth in realisations to ~| 5,600/t (broadly inline with I-direct estimates) and 3.6% growth in volumes to 2.24 MT (vs. Idirect estimate of 2.2 MT). Led by an improvement in realisations, EBITDA margins improved 480 bps YoY to 20.3% but remained below I-direct estimates of 22.1% owing to higher-than-expected raw material costs and other expenses. EBITDA/t for the quarter was at | 1,135/t, up 44% YoY (vs. I-direct estimate of | 1,240/t). Led by improvement in profitability, EBITDA witnessed a 50% increase YoY to | 254 crore (vs. I-direct estimate of | 271.4...