Maintain ADD on JK Cement - Healthy performance - HDFC Securities

Mr. Rajesh Ravi, Institutional Research Analyst, HDFC Securities

We maintain ADD on JK Cement (JKCE) with a revised TP of INR 3,210 (11.5x Jun'23E consolidated EBITDA). JKCE delivered a healthy show in Q1FY22. While consolidated sales volume fell ~22% QoQ (pandemic-led), robust grey cement pricing drove up blended NSR by 3% QoQ, which more than offset 2% opex inflation, moderating impact on profits. Thus, consolidated revenue/EBITDA/APAT fell 20/17/25% QoQ to INR 17.14/4.0/1.92bn respectively. The company is working at swift pace towards its Greenfield 4mn MT grey cement expansion in central region.

Q1FY22 performance: The pandemic drove grey cement/W&P volume decline of 21/28% QoQ. Despite lower sales, grey NSR firmed up 7% on robust pricing and lower share of clinker and non-trade sales. However, W&P NSR fell 4% QoQ amidst weak urban sales, moderating blended NSR rise to 3% QoQ. Blended opex rose 2% QoQ, on account ~10% fuel cost inflation, op-lev loss and annual employee cost hike. Subsequently, riding on strong grey realisation, the blended unitary EBITDA firmed up 7% QoQ to INR 1,295/MT. The share of trade sales improved to 68% vs 65% QoQ. Blended cement production increased to 62% vs 58% QoQ. JKCE expects to expand the share of blended cement to 75%, going ahead, as its trade sales increase.

Capex update and outlook: JKCE's 0.3mn MT clinker debottlenecking will be completed in Q2FY22. It expects to commission its 4mn MT greenfield plants in the central region by end FY23E. The company will incur a Capex of ~INR 12.5/14bn in FY22/23E towards these. Over the next 10 years, JKCE is planning to increase the share of green power to ~75% vs 25% currently. Of these, WHRS would contribute atleast ~50% of total power requirements and the rest would mostly be solar power (on opex model basis). We marginally upgrade consolidated EBITDA estimates by 1/2/6% for FY22/23/24E respectively. We maintain our ADD rating on the stock with a revised TP of INR 3,210/sh (11.5x Jun'23E consolidated EBITDA).

Shares of J.K. CEMENT LTD was last trading in BSE at Rs. 3166.15 as compared to the previous close of Rs. 3190.85. The total number of shares traded during the day was 3969 in over 1166 trades.

The stock hit an intraday high of Rs. 3279 and intraday low of 3122.25. The net turnover during the day was Rs. 12763001.

Source : Equity Bulls

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