Buy JK Cement; target of Rs 2240: Dolat Capital Market

Dolat Capital Market's research report on JK Cement

JKCE's revenue was in line and EBITDA, EBITDA/tn and PAT was above estimates. Volumes and realization were in line and cost lower than estimates. This is the highest ever quarterly revenue, EBITDA, EBITDA/tn and PAT for the company. JKCE posted strong set of numbers with 23.6%/ 61.7%/ 105.5% YoY growth in revenue/ EBITDA/ PAT to Rs15.5 bn/ Rs4.1 bn/ Rs2.2 bn in Q2FY21 led by 25.5% YoY growth in blended volume, partially offset by decline in blended realization by -1.5% YoY (+1.0 QoQ). We expect 12.2%/ 13.7%/ 15.2% revenue/ EBITDA/ APAT CAGR over FY20-23E led by 11.9%/ 13.5%/ 10.0% blended volume growth and (1.3%)/ 1.4%/ 0.9% blended cement realization growth in FY21E/ FY22E/ FY23E. We increase our revenue and EBITDA estimates by 4.9%/ 4.2% and 18.8%/ 14.2% for FY21E/ FY22E factoring H1FY21 results. Accordingly, we increase our APAT estimates by 34.2%/ 23.6% for FY21E/ FY22E and introduce FY23E. We like JKCE because of its sizable presence in higher EBITDA margin contributing white cement & putty business and healthy cash generation & RoE.

Outlook

Moreover, its recent 4.2 mtpa strategical expansion into strong pricing markets of north/central will benefit it. Thus, we upgrade to Buy with revised TP of Rs2,240 (11x Sep'22E EV/EBITDA + 0.5x Sep'22E CWIP + 1x PB investment in Fujairah, UAE).