Earnings Update - JK Cement (JKCE IN) - Robust quarter driven by better realization - CSEC Research

Robust quarter driven by better realization

- JKCE posted a revenue growth of 8%YoY to INR 10.2bn due to higher net realization (+7.8% YoY) at INR 4,735/tn. Volume growth (+ 12% QoQ) to 2.15 mn ton.

- Grey cement revenue grew by 6% YoY to INR 6.9bn due to higher realization (+9.1% YoY) at INR 3,719/ton. Grey cement sales volumes decline by 2%YoY to 1.86 mn tons due to lower sales from northern operations. For FY18, Management guided for volume growth of ~7-8% in grey cement.

- Company's white cement (including wall putty) segment posted a revenue growth of 9.5% YoY to INR 3.3bn driven by volume growth of 5.1%YoY to 0.29 mn ton and higher realization (+4.0% YoY) to INR 11,384/ton.

- Raw material costs grew by 15.3%YoY to INR 2,602mn (Blended Raw material cost/ton grew by 3.5%YoY to INR 868). Freight costs fell by 3.4% YoY to INR 1,982mn (Blended Freight cost/ton fell by 2.3%YoY to INR 921).

Valuation: Increased capacity coupled with higher capacity utilization (due to expected improvement in Industry's demand-supply dynamics mainly led by increase in infrastructure spending and affordable housing under Pradhan Mantri Awas Yojna) and strong margins from Grey cement business augurs well for JKCE going ahead. At CMP the stock trades at EV/EBITDA 11.6X and 9.6X FY18E&19E respectively. We rate the stock an Outperformer with a price target of INR 1259 based on EV/EBITDA multiple of 10X FY2019E.

Risks: Delay in commissioning of the capacity, adverse movement in coal/pet coke prices.

Shares of J.K.CEMENT LTD. was last trading in BSE at Rs.1113.1 as compared to the previous close of Rs. 1102.25. The total number of shares traded during the day was 3316 in over 149 trades.

The stock hit an intraday high of Rs. 1124.95 and intraday low of 1060. The net turnover during the day was Rs. 3688383.

Source : Equity Bulls

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