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Buy JK Cement, target Rs 1,204: Anand Rathi

We expect 28 percent PAT CAGR over FY19-21, partly hit by higher depreciation and interest costs.

August 26, 2019 / 12:33 PM IST
 
 
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JK Cement - Highest-ever EBITDA/tonne, its operating region’s strong pricing context and higher white cement sales led to JK Cement’s best quarterly performance.

Q1FY20 revenue/EBITDA/PAT rose 19/102/212 percent. Besides capacity expansion, its constant measures to improve operating efficiency (savings in logistics costs, de-bottlenecking) would further boost growth. The ongoing capacity expansion would keep leverage high.

Price hikes where the company operates (North/South), more white cement sales and rationalised freight cost led to its highest-ever EBITDA/tonne in Q1 FY20.

With the cement industry expected to grow ~7 percent, management talked of ~10 percent volume growth in FY20. The 4.2m tonne grey cement capacity expansion is on track, which would keep leverage high

With demand anticipated to pick up from H2 FY20, the new capacity commencing and steady prices.

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We expect 9.8/14.5 percent volume/ revenue CAGRs over FY19-21. Cost rationalisation and easing petcoke prices would lead to a 25 percent EBITDA CAGR over FY19-21.

We expect 28 percent PAT CAGR over FY19-21, partly hit by higher depreciation and interest costs.

We raise our rating to a Buy, with a higher target of Rs  1,204, implying PE of 17.5x and EV of USD 109/tonne.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Moneycontrol Contributor
first published: Aug 26, 2019 12:33 pm

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