JK Lakshmi Cement Ltd. share price target

Increased profitability along with slower capex pace should keep JKLC's net D/E at comfortable levels (below 1x). Post recent corrections in its stock price, JKLC's valuations are attractive: 7.5x FY21E (EV of USD 69/MT). We thus, upgrade to BUY with TP Rs 381/share. Key risks: Weak future capex execution (as in past) will impact its volume growth visibility, sharp pull back in cement prices. We upgrade JK Lakshmi (JKLC) to BUY (from Neutral earlier), with SOTP based TP of Rs 381 (Standalone at 8x FY21 EBITDA, its 71% holding in Udaipur Cements at 20% disc and ascribe 50% value to FY21E CWIP). Our TP implies EV of USD 81/MT.

Change in sales mix, improving realisations to drive growth Since the company has low headroom for growth due to capacity constraints, the management intends to increase the blended cement ratio and reduce clinker sales, which will also aid in increasing profitability. They would reduce clinker sales and consume the same for cement production. This can be seen during the quarter where cement sales increased 11% YoY and clinker sales plunged 60% in the quarter. During Q1FY20, the company also launched composite cement in eastern markets. By Q2FY20E, the...

Change in sales mix to improve realisations During FY19, the company sold 8.7 MT of cement and 0.96 MT of clinker and the blended cement mix stood at 65% for FY19 which the management intends to bring increase to 70%. Going ahead, the company intends to reduce the clinker sales and consume it for production of cement which will improve the realisations further. Additionally, the thrust to increase the trade sales in the sales mix from the current 55% would also aid realisations. In April, there have been pan-India price hikes taken to the tune of 5%-9%, and...

JKLC reported a strong growth in revenue at 30.7%YoY aided by robust volume growth at 31.7%YoY but realisation was muted. Out of total 9.66MT volumes in FY19, 0.96MT was from clinker sales. JKLC expects conversion of these clinker sales into own cement volumes in FY20 which will lead to better realization. EBITDA per ton declined by 1.6%YoY to Rs446 impacted by higher input cost (+31%YoY) partially off-set by savings in fuel (-11% YoY), freight (-12%YoY) and staff expenses (-18%YoY). Commissioning of 20MW thermal power plant (in 1QFY19) and...

We estimate JKLC's EBITDA CAGR of 25% driven by pricing and cost tailwinds during FY19-21E. JKLC's upcoming 20MW CPP in Durg and GU in Cuttak will improve east profitability. Increased profitability along with slower capex pace should keep net D/E at comfortable levels (below 1x). We maintain NEUTRAL rating with TP Rs 378/share, as the stock appears fully valued currently. We retain NEUTRAL rating on JK Lakshmi (JKLC) with SOTP based TP of Rs 378 (Standalone at 8x FY21 EBITDA, its 71% holding in Udaipur Cements at 20% disc and ascribe 50% value to FY21E CWIP). Our TP implies EV/MT of USD 80

to INR1.3b (higher than our est. of INR1.2b) due to higher volumes, with margins flat YoY at 11.2%. Tax rate stood at 24.7% v/s -10.7% in the year ago period. Thus, PAT increased 17% YoY to INR433m (v/s est. of INR356m). Management commentary: (1) JKLC sold 9.65lakh tonnes of clinker in FY19. The company plans to reduce the sales of clinker in future. (2)Work on the 20MW Thermal Power plant in Durg and the grinding unit in Odisha of 0.8mt is likely to be commissioned by 2QFY20. (3) Raw material cost for the quarter was higher due to clinker purchase. (4) Prices declined in the Gujarat market in 4QFY19....

ICICI Securities Ltd | Retail Equity Research JK Lakshmi Cement reported a mixed set of Q3FY19 numbers. Net sales increased 11.7% YoY to | 935 crore (vs. I-direct estimate of | 895 crore), driven by 9% volume growth to ~ 2.3 MT (vs. I-direct estimate of 2.2 MT). Realisations were at | 4056/t (marginally lower than I-direct estimate of | 4083/t) On the margin front, EBITDA margins fell 78 bps YoY to 10.5% (below I-direct estimate of 13.1%) due to higher freight and power &...

JK Lakshmi Cement (JKLC) is part of JK group mainly focused in North, West and Eastern regions of India with a consolidated capacity of 12.5MT. Q2FY19 revenue grew 9.6%YoY aided by healthy volumes (12.5%YoY). However, realisation de-grew 2.6%YoY, resulted in 150bps margin decline. Total cost/Ton declined by 0.9%YoY due to reduction in freight (-12%YoY) and other expenses (-3.3%YoY) which has offset by 11% surge in fuel cost. Freight cost declined on account of reduction in lead distance. Full benefit from relaxation in axle load will reduce cost further....

JK Lakshmi Cement's Q2FY19 results were better than our estimates. Revenues increased 9.6% YoY to | 851.4 crore (above I-direct estimate of | 789 crore) led by 12.6% volume growth to 2.13 MT (vs. I-direct estimate of 1.97 MT) and 2.6% YoY decline in realisation to | 4,003/t (vs. I-direct estimate of | 4,010/t) The EBITDA margin contracted 153 bps YoY to 10.8% (vs. I-direct estimate of 9.6%) due to higher fuel & power cost led by higher...