Accumulate JK Cement; target of Rs 1689: Dolat Capital

Dolat Capital's research report on JK Cement

JKCE's revenue was in line however, EBITDA margin, EBITDA/tn and PAT was above estimates. Volumes were in line whereas realization below estimates. JKCE posted muted set of numbers with 27.3%/ 29.1%/ 49.5% YoY de-growth in revenue/ EBITDA/ PAT to Rs9.6 bn/ Rs2.2 bn/ Rs777 mn in Q1FY21 due to 5.1% YoY de-growth in blended realization (-1.4% QoQ) coupled with 23.5% YoY decline in blended volume to 1.77 mt. We expect 10.5%/ 81%/ 0.7% revenue/ EBITDA/ APAT CAGR over FY20-22E led by 6.6%/ 13.8% blended volume growth and (1.2%)/ 1.7% blended cement realization growth in FY21E/ FY22E. We increase our revenue and APAT estimates by 9.6%/ 5.1% and 24.9%/ 8.2% for FY21E/ FY22E factoring Q1FY21 results. We broadly maintain our EBITDA margin estimates. We like JKCE because of its sizable presence in higher EBITDA margin contributing white cement & putty business and healthy cash generation & RoE.

Outlook

Moreover, its strategical expansion (3.5mtpa done during FY20 + 0.7mtpa by Q3FY21) of its grey cement into strong pricing markets of north/central will benefit it. However, 19% run up in stock price post our Q4FY20 result update dated 18 Jun'20, leaves limited upside. Thus, we maintain Accumulate with revised TP of Rs1,689 (11x FY22E EV/EBITDA + 0.5x FY22E CWIP).

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