Buy J K Cement; target of Rs 1277: Motilal Oswal

Motilal Oswal's research report on J K Cement

1QFY18 revenue increased 16.4% YoY to INR 10.4b (est. of INR 9.8b). Grey cement volumes increased 15% YoY on account of higher clinker exports to Nepal. Growth was higher in southern operations due to a favorable base. White cement volumes were flat YoY due to GST-led destocking, the impact of which was offset by higher wall putty volumes due to ramp-up of operations in Katni.

Outlook

With lower immediate capex and annual FCFE of INR 3-4b over FY18-FY20, there remains visibility of deleveraging from the FY17 peak of INR 31b. We maintain Buy with a TP of INR 1,277 (12x FY20E white cement EV/EBITDA and 8x FY20E grey cement EV/EBITDA).