ICICI Direct is bullish on JK Lakshmi Cement has recommended buy rating on the stock with a target price of Rs 485 in its research report dated May 27, 2019.
ICICI Direct's research report on JK Lakshmi Cement
JK Lakshmi Cement reported a mixed set of Q4FY19 numbers. Though the topline was better than our estimates due to higher volume growth, EBITDA margins and realisations were below our estimates. JK Lakshmi Cement registered 30.7% growth in its revenues to Rs 1172.5 crore led by 32% growth in volumes to 2.95 MT (higher than I-direct estimates of 2.44 MT) on the back of strong spending pre-elections. Realisations, however, dipped 1% YoY to Rs 3810 (vs. I-direct estimate of Rs 4076 crore). On the margin front, the EBITDA margin contracted 10 bps YoY to 11.2% (below I-direct estimate of 13.5%) due to input costs. EBITDA, however, was at Rs 131.2 crore, marginally below I-direct estimate of Rs 134.9 crore). The company reported 34% YoY increase in PAT to Rs 43.3 crore for Q4FY19 in line with I-direct estimate of Rs 43.1 crore.
Multiple triggers like higher margins led by improving sales mix, focus on optimisation of the P&F and freight costs, strong cash flows leading to leaner balance sheet prompt us to have a positive outlook on JK Lakshmi, going ahead. We value JK Lakshmi at 10x FY21 EV/EBITDA and arrive at a target price of Rs 485/share. We maintain our BUY rating.
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