Dolat Capital is bullish on JK Lakshmi Cement has recommended buy rating on the stock with a target price of Rs 283 in its research report dated 21, 2020.
Dolat Capital's research report on JK Lakshmi Cement
JKLC posted (9.5%)/ 53.9%/ 128.5% YoY growth in revenue/ EBITDA/ APAT to Rs10.6 bn/ Rs2.0 bn/ Rs988 mn in Q4FY20 driven by 7.7% YoY realization growth (-0.5% QoQ). We expect 1.5%/ 0.6%/ (4.3%) revenue/ EBITDA/ APAT CAGR over FY20-22E led by (15.0%)/ 20.0% volume growth and (1.0%)/ 2.0% cement realization growth in FY21E/ FY22E. We reduce our FY21E estimates by 21.1%/ 26%/ 49.4% for revenue/ EBITDA/ APAT primarily due to (-15%) vs. 0.9% volume growth and (-1%) vs. 0.7% realization growth to factor extended COVID-19 lockdown. However, we broadly maintain our FY22E estimates for revenue/ EBITDA/ APAT. We factor JKLC to start doing capex by end of FY21E for brown-field expansions to capture growth in demand.
The current valuation of 7.2x/ 5.5x FY21E/22E EV/EBITDA (~50% discount to 3/ 5 /10 year averages) are attractive. Thus, we maintain Buy with a revised SOTP of Rs283 based on (6x standalone FY22E EV/EBITDA, 50% of FY22E Capital WIP and JKLC’s 72.5% stake in Udaipur Cement Works at 30% holding discount).
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