Prabhudas Lilladher's research report on JK Lakshmi Cement
JK Lakshmi (JKLC) reported Q1FY23 earnings in line with our/consensus estimates. EBITDA remained flat YoY at Rs2.57bn as fall in margins were offset by growth in volumes. Cost increased much higher than expectation. But, equally strong realisations negated the increase in costs. We cut our EBITDA estimates by 6.7%/2.6% for FY23e/FY24e due to incommensurate increase in realisations compared to sharp rise in costs. JKLC’s margins have started inching above its average rate of Rs750/t as concentrated efforts on 1) reducing share of lower margin clinker volumes, 2) optimisation of lead distance and 3) narrowing the gap on prices with peers have started paying off.
This has helped JKLC to reduce the gap on margins with its peers. Underpinned by Improved quality of operations and attractive valuations, we maintain Accumulate with TP of Rs555, EV/EBITDA of 7.0x FY24e.
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