Maintain BUY on JK Cement - Sparkling performance continued - HDFC Securities

Mr. Rajesh Ravi, Institutional Research Analyst, HDFC Securities

During 2QFY21, JK Cement's (JKCE's) consol revenue/EBITDA/APAT soared 24/69/170% YoY to Rs 16.34/4.31/2.21bn respectively. Both grey and white/putty businesses reported solid volume growth and margin expansions on good demand and continued cost controls. A robust 2Q along with working capital release cooled off leverage. We continue to like JKCE for its continued healthy traction across both the businesses. We maintain BUY rating on the stock with a revised TP of Rs 2,110/share (10x consolidated Sep'22E EBITDA).

2QFY21-strong show across both business segments: Healthy demand supported production ramp-up on recent grey cement expansions, driving 28% YoY cement volume growth. Unitary EBITDA for grey cement (our estimates) soared ~50% YoY to Rs 1,100/MT on buoyant NSR and lowered costs, leading to 90% EBITDA jump to Rs 2.7bn. Strong domestic and export demand for white/putty drove up the consolidated volume by 17% YoY. Cost control further buoyed segmental EBITDA by ~40% YoY to Rs 1.6bn. A robust 2Q drove 1H consolidated EBITDA by 14% YoY. Working capital release (vs rise YoY) accelerated consolidated OCF rise by 2x to Rs 7.3bn. Capex spend slowed YoY to Rs 3.2bn, thus boosting FCF. This led to 16% reduction in net debt to Rs 21bn vs Mar'20.

Capex update and outlook: JKCE expects to complete the debottlenecking of clinker in Rajasthan by 2QFY22. It will then accelerate work on Greenfield expansion in Panna, MP (3.5mn MT). In the interim, capacity expansions across both grey and white/putty segments will drive growth and boost margins. We expect these to bolster its cash accruals and broadly support its MP expansions. We raise our FY21E/22E/23E EBITDA estimates by 17/13/8% on strong volume and cost performance. We maintain BUY on JKCE with a higher target price of Rs 2,110/sh (10x Sep'22E consolidated EBITDA)

Shares of J.K.CEMENT LTD. was last trading in BSE at Rs.1874 as compared to the previous close of Rs. 1845.5. The total number of shares traded during the day was 2954 in over 494 trades.

The stock hit an intraday high of Rs. 1892.5 and intraday low of 1850.15. The net turnover during the day was Rs. 5538860.

Source : Equity Bulls

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