Maintain BUY on JK Lakshmi Cement - Strong show - HDFC Securities

Mr. Rajesh Ravi, Institutional Research Analyst, HDFC Securities and Mr. Saurabh Dugar, Institutional Research Analyst, HDFC Securities

JK Lakshmi Cement (JKLC) reported an extremely strong performance in 4QFY21, led by healthy realisation and robust cost controls. Its 4QFY21 standalone revenue/EBITDA/APAT grew 11/40/64% QoQ (+25/33/66% YoY) to INR 13.2/2.7/1.7bn respectively. It also reported strong working capital reduction, which aided sharp debt reduction to nine-year low net debt. We continue to like JKLC for its continued deleveraging and asset sweating. We maintain BUY with a revised SOTP-based target price of INR 620/share (standalone business at 8x FY23E EBITDA and JKLC's 72.5% holding in UCWL at a 20% discount to current market capitalisation).

4QFY21 performance: JKLC's sales volume rose 8/18% QoQ/YoY to 2.9mn MT. Increased share of cement sales and better non-trade pricing drove up NSR 3% QoQ (+6% YoY). Additionally, JKLC exhibited all-round cost controls (input and fixed), thereby leading to 2% QoQ opex decline. These drove up unitary EBITDA to the nine-year high of INR 924/MT (+30/13% QoQ/YoY), leading to strong EBITDA/APAT growth. Lower capital charges and higher other income accelerated APAT gains.

FY21 highlights and outlook: During FY21, despite COVID impact in 1H, JKLC clocked 8% volume growth. Stable pricing and cost reduction boosted unitary EBITDA by 9% YoY to INR 799/MT (8-year high) and EBITDA by 5% YoY. Significant working capital controls further drove up OCF by 60% YoY to INR 8.6bn. With low Capex outgo, FCF also soared 57% to INR 9.8bn. This helped reduce net debt by 39% YoY to INR 3.9bn (9-year low). JKLC's capacity expansion in its subsidiary is on track. We continue to like the company for its continued deleveraging and asset sweating. Factoring in a strong 4Q, we increase our FY22/23 EBITDA estimates by 11/10% respectively.

Shares of JK LAKSHMI CEMENT LTD. was last trading in BSE at Rs.527.75 as compared to the previous close of Rs. 493.4. The total number of shares traded during the day was 150111 in over 5065 trades.

The stock hit an intraday high of Rs. 535.55 and intraday low of 485.4. The net turnover during the day was Rs. 77336873.

Source : Equity Bulls

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