Buy J K Cement; target of Rs 777: Motilal Oswal

Motilal Oswal's report on J. K. Cement

"JK Cement’s (JKCE) 2QFY15 revenue grew 32.6% YoY (-11% QoQ) to INR8.3b (v/s est. of INR7.4b). EBITDA stood at INR876m (v/s est. of INR788m), +1.3x YoY (-11% QoQ), translating into margin of 10.6% (in-line). Lower depreciation and tax writeback (effective tax rate stood negative in 2Q) boosted PAT further to INR323m (v/s a loss of INR215m in 2QFY14)."

"Raise FY15E/16E EPS by 11%/23% to INR22.3/58 to factor (a) stronger volume growth (24%/13% in FY15E/16E v/s 15%/10% earlier), (b) marginal increase in energy cost, (c) lower tax and depreciation/interest run-rate (guided lower than earlier estimate). The stock trades at 7x EV/EBITDA and USD95/t (blended). Maintain Buy with a target price of INR777 (USD80/t for Grey cement capacity and 6x FY16E white cement EBITDA)", says Motilal Oswal research report.

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