JK Lakshmi Cement Ltd. share price target

We recommend a BUY on JK Lakshmi Cement Ltd with a Target Price of Rs. 370, an upside of 8% from CMP of Rs. 343 and Stop Loss of Rs. 325.

JKLC reported revenue growth of 12%YoY mainly driven by volume growth of 16%YoY amid challenging conditions, which was better than industry (de-growth of ~11%YoY). However, blended realisation de-grew by 3.5% YoY. We expect gradual pickup in demand due to relaxation in restrictions and revival in economic activities. Factoring the strong volume growth in the quarter, we increase our volume assumptions and expect revenue to grow by 4%CAGR over FY20-22E. Lower fuel cost supports margins despite pressure on realisation EBITDA margin improved by 200bps to 17.9% mainly due to reduction in costs and...

Being a predominantly north (8.2 MT capacity) and central (3.5 MT capacity) player, the company has got a structural advantage of balanced supply and demand environment in these two high growing regions. Further, selfsufficiency in power, through captive power plant (CPP) of 54 MW, waste heat recovery (WHR) plant of 14 MW and solar power plant of 6 MW have helped the company to reduce reliance on costly grid power. The progress on the WHRS Unit-III project at Sirohi is as per schedule and will be commissioned by July 2021. In the eastern region, the company has a 7 MW WHR plant and has recently commissioned a CPP of 20 MW, to become selfsufficient. To increase penetration in the east and reduce freight costs, it has...

The company reported healthy operating performance on the back of higher volume, better realization and cost control.The revenue/Ebitda/APAT grew by 12%/25% and 75% on YoY basis. The company recorded healthy EBITDA margin of 18% during the quarter driven by contraction in operating cost

the weakness in Eastern region (24% of total volumes). Tight demand-supply market conditions would help sustain margins in North and Gujarat regions. East region would witness flooding of capacity addition over next couple of years. However, we do not expect further deterioration in region's margins due to unsustainable RoEs and industry consolidation. Commissioning of CPP, WHR and split grinding unit at Odisha further boosted the cost competitiveness of its East operations. To factor higher realisations and better growth in volumes, we upgrade our EBITDA estimates of FY21e/FY22e...

JKLC reported results above estimates on all fronts. JKLC posted 11.7%/ 25.6%/ 75.4% YoY growth in revenue/ EBITDA/ APAT to Rs10.4 bn/ Rs1.9 bn/ Rs806 mn in Q2FY21 led by 15.8% YoY...

JK Lakshmi Cement Limited (JKL)reported strong outperformance for Q2FY2021 earnings led by strong cement volume offtake and reduced opex/tone. JKL's standalone revenues grew 11.7% y-o-y to Rs. 1045 crore led by 15.8% y-o-y rise in cement volume to 2.39 million tone (much higher than our as well as street estimate). The blended realization improved by 1.1% q-o-q (down 3.5% y-o-y) to Rs. 4381/tone. On the opex front, lower power & fuel cost (down 14.9% y-o-y on per tone basis led by lower pet coke prices) and lower freight costs (down 4.8% y-o-y, down 2.1% q-o-q) led to an overall decline in opex/tone at Rs. 3598 (down 5.8% y-o-y, up 0.5% q-o-q). Hence, EBITDA/tone increased by 8.5% y-o-y (up 4% q-o-q) to Rs. 783 (versus our estimate of Rs. 736/tone). Consequently,...

JKLC is a dominant player in the cement industry in its key markets of North and West India and derives 75% of its revenue from these two regions and has a sizeable market presence in the Eastern India also . The total cement capacity of the company stands at 13.3 mntpa.

Covid-19 impacts the volumes but better than industry JKLC reported revenue de-growth of 20.8%YoY mainly impacted by volume declines (18%YoY) owing to lock-down restrictions on account of Covid-19. However, the volumes are better than industry (de-growth of ~38%YoY). Blended realisation degrew by 3.4% YoY due to higher than normal percentage of clinker sales (0.3MT Vs 0.11MTYoY). We remain cautious about the demand outlook in the short-term due to current uncertain situation. We factor ~7%YoY decline in volumes in FY21 but healthy double digit recovery in FY22E supported by revival in economic activities. The much awaited brownfield capacity expansion is likely to be announced in the coming quarter...

We initiate coverage on JK Lakshmi Cement Ltd with a BUY recommendation and a Target Price of Rs 339, which implies an upside of 23% from the current levels.