JK Lakshmi Cement Ltd. share price target

We maintain our Target at Rs.380 but downgrade to Accumulate due to recent surge in the stock price. Q3FY20 revenue grew by 7.5%YoY aided by 4.5% YoY growth in realisation while volume growth was 2.8%YoY. EBITDA per ton improved to Rs641 from Rs426 YoY mainly supported by realisation growth and benign cost. Coal linkage in 20MW power plant in East and expected 10MW Waste Heat Recovery will bring additional cost savings. JKLC's current focus is on deleveraging (repayment of ~Rs300p.a)...

Lower realisation growth leads to miss in performance Volume growth to resume in FY21E; sales mix improving Owing to elections, heavy monsoons in several states and overall weakness in the economy, 9MFY19 volumes for cement growth remained flattish. Volumes have also remained flat for the first nine months. For FY20E, we expect the company to report ~3% decline in volumes (Q4FY19 being a very high base quarter). Led by expectations of a revival in the demand scenario, we expect healthy growth in FY21E. Realisations are also expected to grow...

Robust profitability should keep JKLC's net D/E at comfortable levels (below 1x), despite factoring in capex acceleration from FY21E. We thus, estimate its standalone net Debt/EBITDA to further cool off to below 1.5x levels during FY20-22E (vs its >3x levels in the last six years)! Stable north market outlook and healthy cashflow generation should drive re-rating for JKLC. We reiterate a Buy with a TP of Rs 485. We reiterate BUY on JK Lakshmi (JKLC), with SOTP based TP of Rs 485 (Standalone at 8x Sep21E EBITDA, its 71% holding in Udaipur Cements at 20% disc and 50% value to Sep21E CWIP). Our TP implies EV of USD 84/MT.

Sector: Cement /Small Cap | Earnings Update 2QFY20 Background: JK Lakshmi Cements (JKLC) is a north Indian Cement player, established in 1982. JKLC has clinker units in Sirohi, Rajasthan and grinding units in Rajasthan, Gujarat and Haryana. The current clinker capacity is 6.2 MTPA and cement capacity is 11.5 MTPA. JKLC derives sales...

Q2FY20 revenue grew by 9.9%YoY aided by strong growth in realisation at 13.4%YoY while volume de-grew by ~3%YoY. Volume decline was mainly due to impact of cyclone in East. Improvement in trade sales in the mix and higher North volumes supported growth in realisation. EBITDA per ton improved to Rs722 from Rs431 YoY mainly supported by realisation growth while total cost increased by 7%YoY . Commissioning of new grinding unit (Odisha 0.8MT) and 20MW thermal power plant in East will bring cost savings while benefit from softening of pet coke prices is expected in coming quarters....

Robust profitability should keep JKLC's net D/E at comfortable levels (below 1x), despite factoring in capex acceleration from FY21E. We thus, estimate its standalone net Debt/EBITDA to further cool off to below 1.5x levels during FY20-22E (vs its >3x levels during the preceding six years)! We reiterate Buy with a revised TP of Rs 483. We reiterate BUY on JK Lakshmi (JKLC), with SOTP based TP of Rs 483 (Standalone at 8x Sep21E EBITDA, its 71% holding in Udaipur Cements at 20% disc and 50% value to Sep21E CWIP). Our TP implies EV of USD 86/MT.

JK Lakshmi Cement reported strong growth in revenues and profitability in Q2FY20. However, while revenues beat our estimates, profitability during the quarter was below our forecasts due to higher production costs. The company reported 10% revenue growth to | 935.5 crore (above I-direct estimate of | 877.4 crore). Volumes remained in line with I-direct estimates at 2.06 MT, declining 3% YoY. Topline growth was driven entirely by 13.4% growth in realisations to | 4,540/t (I-direct estimates of | 4,280/t). EBITDA/t increased ~68% YoY to | 722/t while EBITDA margins expanded 513 bps...

Total sales declined 3% YoY to 2.06mt in 2QFY20. While cement sales were up 3% YoY to 1.92mt, clinker sales declined 49% YoY to 0.13mt. Realizations increased 13% YoY to INR4,541/t 4 November 2019 INR1.1b), with the margin at 15.9% (up ~5pp YoY). PAT increased 6x YoY to Sales/EBITDA/PAT increased 11%/72%/5x YoY. Cash conversion rate (operating cash flow/ EBITDA) was low at 0.5x due to higher working capital, resulting in weak operating cash flow of INR1.3b. Working capital was impacted by an increase in inventory by 13 days and in receivable days by 3 over 1HFY20. For 2HFY20, we expect sales/EBITDA/PAT growth of 8%/46%/90% YoY.

to remain weak link for JKLC due to depressed prices and high competition intensity. Commissioning of 20MW CPP, 8MW WHR and 0.8mtpa Grinding unit (GU) at Odisha would add in little to margin expansion of Eastern operations due to intense competition in the region, severe shortage of...

Aided by higher-than-expected realisation, JK Lakshmi Cement (JKLC) has reported a strong set of numbers for 2QFY20, despite dismal sales volume. EBITDA grew by a stellar 62% YoY to Rs1.48bn vs. our estimate of Rs1.1bn, while EBITDA/tonne stood strong at Rs722 (vs. our estimate of Rs526) vs. Rs431 and Rs729 in 2QFY19 and 1QFY20, respectively owing to Rs370/tonne higher realisation than our estimate. Average realisation/tonne increased by 13.4% YoY to Rs4,541, which is even sequentially higher by 1.6%. Notably, low sales volume in Chhattisgarh markets and higher volume in Northern region led to higher realisations. Sales volume declined by 3% YoY and 11.6% QoQ to 2.06mnT in 2QFY20, while it declined marginally by 0.5% in 1HFY20....