Prabhudas Lilladher's research report on JK Lakshmi Cement
JK Lakshmi (JKLC) reported strong set of Q4FY22 earnings. EBITDA grew 3% YoY to Rs2.76bn, a beat of 30%/43% over our/consensus estimates (CE). The beat was primarily due to sharply lower costs which came at Rs3,885/t, up 7% YoY v/s our estimate of 17% increase at Rs4,255. Lower than expected increase in power & fuel cost (due to low cost inventory), cut in advertisement costs (not participated in IPL team sponsorship), absence of consultancy charges and higher provisions in 9MFY22 contributed to lower costs. While, realisations missed our estimate by 3% or Rs168/t. We continue to maintain that JKLC’s margins would remain capped at ~Rs800/t due to its high lead distance, elevated share of non-trade volumes and limited scope for cost reduction.
Given the steep fall in stock price (down 40% since our rating downgrade in August 2021), stable performance on earnings, sound B/S and valuations restored back to attractive zone, we upgrade stock to Accumulate with TP of Rs570, EV/EBITDA of 7.0x FY24e.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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.