Edelweiss' research report onJK Cement
JK Cement’s (JKCE) Q4FY18 volumes jumped 27% YoY for grey cement (20% estimate), while those for white segment rose 11% (7% estimate). Despite impressive volumes, EBITDA at INR1.82bn dipped 5% YoY (5% below estimate) owing to weak prices and cost pressure in grey cement business. With grey cement realisation/t rising 6% versus a cost hike of 13% YoY, EBITDA/t stood at a tepid INR271 (INR456 for FY18).
OutlookJKCE remains one of our preferred picks as it is likely to be a major beneficiary of expected surge in industry clinker utilisations in North. Robust white cement business has potential to mitigate volatility in grey segment. Factoring in superior RoE, we value JKCE at 10x FY20E EV/EBITDA and maintain ‘BUY/SO’ with revised TP of INR1,209.
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