JK Lakshmi Cement Ltd. share price target

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.

Focus on cost efficiencies to drive margin expansion Being predominantly a north (8.2MT capacity) and central (3.5 MT capacity) player, the company has got 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 has helped the company to reduce reliance on costly grid power. In the eastern region, the company has already commissioned its 7 MW WHR plant and has recently commissioned CPP of 20MW, to become self-sufficient. To...

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 given the wafer thin margins (with near nil RoCE) and likely consolidation. Commissioning of CPP, WHR and split grinding unit at Odisha further boosted the cost competitiveness of its East operations. Led by bottomed-out earnings in East operations (25% of volumes) and strong outlook on North and Gujarat region (combined 75%), JKLC's earnings quality improved significantly over last couple of years....

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....