Prabhudas Lilladher is bullish on JK Lakshmi Cement has recommended buy rating on the stock with a target price of Rs 340 in its research report dated May 21, 2020.
Prabhudas Lilladher's research report on JK Lakshmi Cement
JK Lakshmi Cement (JKLC) posted strong set of Q4FY20 earnings with beat of 11%/16% on PL/Consensus EBITDA estimate on the back of lower than expected costs. Strong profitability in North and Gujarat regions helped company to offset the weakness in Eastern region (25% of total volumes). Tight discipline, bottomed-out demand and limited capacity addition would help sustain margins in North and Gujarat regions. East region would witness flooding of capacity addition over next couple of years. However, we do not expect further deterioration in region’s margins given the wafer thin margins (with near nil RoCE) and likely consolidation. Commissioning of CPP, WHR and split grinding unit at Odisha further boosted the cost competitiveness of its East operations.
Supported by attractive valuations (EV/EBITDA of 5.5x/4.0x FY21e/FY22e), we maintain BUY with TP of Rs340, EV/EBITDA of 6.0x FY22e.
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