JK Lakshmi Cement Ltd. share price target

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 volume from the northern and western regions. The company has market share of ~6-7% in the northern region and ~9-10% in western regions. JKLC is on the spree of capacity expansion;...

JK Lakshmi Cement reported better-than-expected Q4FY20 numbers. Revenues for Q4FY20 fell 9.5% YoY to | 1,061 crore (vs. I-direct estimates of | 910 crore). Revenues declined on account of a 15.1% drop in volumes YoY to 2.5 MT (vs. I-direct estimate of 2.11 MT). Average realisations for the quarter were at | 4,242 per tonne (vs. I-direct estimate of | 4,320/t). Prices remaining high in north and west supported realisation growth. EBITDA margins of the company expanded 784 bps YoY to 19% while EBITDA/t increased 81% YoY to | 808/t (vs. I-direct estimate of | 650/t) led by...

JKLC posted (9.5%)/ 53.9%/ 128.5% YoY growth in revenue/ EBITDA/ APAT to Rs10.6 bn/ Rs2.0 bn/ Rs988 mn in Q4FY20 driven by 7.7% YoY realization growth (-0.5% QoQ). We expect 1.5%/ 0.6%/ (4.3%) revenue/ EBITDA/ APAT CAGR over FY20-22E led by (15.0%)/ 20.0% volume growth and (1.0%)/ 2.0% cement realization growth in FY21E/ FY22E. We reduce our FY21E estimates by 21.1%/ 26%/ 49.4% for revenue/ EBITDA/ APAT primarily due to (-15%) vs. 0.9% volume growth and (1%) vs. 0.7% realization growth to factor extended COVID-19...

The lockdown on account of COVID19 pandemic has impacted the industry volumes significantly due to lack of construction activities. April & May would be a wash out, and assuming gradual relaxation in lockdown and resumption of construction activities, we expect FY21E to end with ~15% volume decline for the industry. We expect JKLC's revenue to decline by ~13% for FY21E due to COVIDF19 impact and lack of capacity additions. The impact of decline in utilization on margin would be partially offset by the benefit of lower pet coke and crude prices. We expect EBITDA margin to decline to 15.1% in FY21E from 15.7% YoY....

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.