Buy JK Cement; target of Rs 2950: ICICI Direct
ICICI Direct is bullish on JK Cement has recommended buy rating on the stock with a target price of Rs 2950 in its research report dated February 10, 2021.
February 15, 2021 / 07:20 PM IST
ICICI Direct's research report on JK Cement
JK Cement’s performance was ahead of our estimates for Q3FY21 with revenue growth of 25.3% YoY to Rs 1760.1 crore (vs. I-direct estimate: Rs 1672.5 crore). Blended sales volume grew 23.8% YoY to 3.17 MT while realisations improved 1.3% YoY to Rs 5,554/t and stayed flat QoQ vs. expected decline of ~2%. EBITDA margins improved 572 bps YoY to 25.5%, better than our estimated margins of 24.8%, supported by lower raw material & employee expenses. EBITDA/t came in at Rs 1,416/t vs. Rs 1085/t last year and Rs 1461/t last quarter. It was better than our expected EBITDA/t of Rs 1,340/t. Reported PAT for Q3FY21 came in at Rs 238.3 crore, up 73.2% YoY, ahead of our estimated PAT of Rs 200.6 crore. On the B/S front, gross debt has increased marginally from Rs 2,733 crore as on Sep-20 to Rs 2,791 crore of Dec-20, owing to capital expenditure made during the year of ~Rs 1,648 crore. With improved earnings, net debt to EBITDA has declined to 0.98x vs. 1.35x reported in FY20 while net debt to equity was at 0.4x vs. 0.51 as of Mar-20. In the next phase of expansion, the company would set up 4 MT integrated grey cement capacity at Panna MP with split grinding unit in UP and 12 MW WHRS plant for capex of Rs 2970 crore (i.e. at $103/t).
We maintain BUY rating with a revised target price of Rs 2950/share (i.e. valuing at 13.5x FY23E EV/EBITDA) (earlier TP Rs 2450).
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