JK Cement - Rating: Hold; Target price: Rs185 - Centrum

We expect net sales to decline 9.2% YoY to Rs6.2bn. Grey cement sales volume is expected to decline 3.2% YoY to 1.2mt. Grey cement realization is expected to decline 11.3% YoY to Rs3,354/tonne. Sales volume of white cement is expected to increase 3.6% YoY to 0.12mt.

EBITDA is expected to decline 49.5% YoY to Rs676mn due to lower sales volume, steep fall in realization and increase in op. costs (raw material, energy and freight costs). On a per tonne basis, Op. cost/tonne is expected to increase 1.8% YoY during the quarter. EBITDA margin is expected to decline 8.7pp YoY to 10.8%.

Consolidated EBITDA/tonne is expected to be Rs504 in the quarter against Rs971 in Q3FY13 and Rs274 in Q2FY14.

Adjusted profit is expected to decline 93.6% YoY to Rs36mn. Adjusted PAT margin is expected to be 0.6% against 8.3% in Q3FY13.

Earnings and target price revised downwards: We are reducing sales volume estimates downwards by 3.7% for FY14E largely due to continuing lower utilization from the Karnataka plant. We have revised realization assumptions downwards by 2.3%/4.4%/4.4% for FY14E/FY15E/FY16E considering pressure on cement prices in the North and South regions. Due to lower realization and sales volume estimates our EBITDA estimates are getting revised downwards by 18.4%/6.3%/4.4% for FY14E/FY15E/FY16E. We maintain Hold rating on the stock with a revised price target of Rs185 (earlier: Rs236), downside of 4.2% from the CMP.

Source : Equity Bulls

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