Choice Equity Broking's report on JK Lakshmi Cement
The amalgamation of Udaipur Cement Works Ltd. (UCWL) and other subsidiaries into JKLC clears the overhang of a complicated corporate structure. Now that the overhang is behind us, our focus is back on JKLC’s amalgamated entity business merits, such as: 1) Capacity addition of 4.4 MTPA by FY28E, 2) Volume growth of 6.0%/5.0%/10.0% in FY26E/27E/28E driven by asset sweating and 3) Cost saving of INR 120/t is expected over a period of the next 2 years. We adopt a robust EV to CE (Enterprise Value to Capital Employed)- based valuation framework, which allows us a rational basis to assign a valuation multiple that captures fundamentals (ROCE expansion over FY25–28E).
Outlook
We maintain our BUY rating on JK Lakshmi Cement Ltd (JKLC) with a TP of INR 1,175, implying an upside of 39%, post 15% correction in the stock price after Q1 results. On our TP, JKLC’s implied FY28E EV/EBITDA is 9.7x, which is reasonable.
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