Maintain BUY on JK Cement - Both segments continue to perform - HDFC Securities

Mr. Rajesh Ravi, Institutional Research Analyst, HDFC Securities & Mr. Nilesh Ghuge, Institutional Research Analyst, HDFC Securities

JK Cement delivered strong volume growth across both grey (+25% YoY) and white/putty (+17% in India) segments, gaining market share. Healthy realization across both segments and increased grey cement productivity (from new capacity) drove margin expansion. Subsequently, consolidated Revenue/EBITDA/APAT rose 25/56/75% YoY to Rs 18.3/4.5/2.2bn resp. We continue to like JKCE for its continued healthy traction across both its segments. We maintain BUY rating on the stock with a revised target price of INR 2,545/share (10.5x Dec'22E consolidated EBITDA).

3QFY21 performance: Grey cement volumes rose 25% YoY on production ramp-up from new expansions in north. NSR growth remained firm at 4%. In our view, grey segmental unitary EBITDA rose 60% YoY to INR 1,040/MT, on healthy pricing and lower opex. Grey EBITDA thus doubled YoY to INR 2.9bn. In the white/putty segment strong 17% YoY domestic volume uptick boosted total segmental volumes by 10% YoY, driving up segmental EBITDA by ~13% YoY to INR 1.6bn. Strong fixed costs controls and higher utilisation across both business segments and increased efficiencies from new grey cement plants offset impact of rising fuel prices.

Capex update and Outlook: JKCE expects to complete clinker debottlenecking in Rajasthan by 2QFY22. Its 4mn MT green-field expansion in Panna, MP (INR 29.5bn capex) is expected to be completed by 1HFY24E. In the interim, capacity expansions across both grey and white/putty segments will continue to drive volume growth and margin expansion. We raise our FY21E/22E/23E EBITDA estimates by 3/4/4% respectively on strong volume and cost performance. We maintain BUY on JKCE with a higher target price of INR 2,545/sh (10.5x Dec'22E consolidated EBITDA).

Shares of J.K.CEMENT LTD. was last trading in BSE at Rs.2711.75 as compared to the previous close of Rs. 2422.05. The total number of shares traded during the day was 49732 in over 5273 trades.

The stock hit an intraday high of Rs. 2898.85 and intraday low of 2408.25. The net turnover during the day was Rs. 130257733.

Source : Equity Bulls

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