Arihant Capital’s report on JK Cement
JK Cement Ltd. for the quarter ended September, 2015 reported about 5% YoY growth in the revenue while the net profit fell down by about 58% YoY.
For this quarter 2QFY16 company’s net sales were Rs. 868cr, up by 4.8% compared to Rs. 828cr in the corresponding quarter last year and up by about 7% quarter on quarter.
The company reported profit before depreciation, interest, tax and amortization at Rs 109cr vs. Rs. 90cr in the corresponding quarter last year, up by 20.3% YoY and up by 24.4% QoQ, majorly due to the higher top line and reduced power and fuel costs.
However, the profit after tax for the company was at Rs. 13.7cr, down by 58% when compared to the corresponding quarter last year. The decrease in profit after tax was mainly dragged by the increase in finance costs.
Finance costs for this quarter were Rs. 69cr vs Rs. 46cr in the corres quarter last year, up by about 50% and up by 5% QoQ. The higher mainly because of high long term borrowings. have increased for H1FY16. Other income for the company also by about 5%.
On the expenditure front, net raw material cost and employee cost were higher for this quarter. Net material cost was at Rs. 178cr (about 20% of net sales) while employee cost was at Rs. 57cr (about 7% of net sales.).
Company having its total installed capacity of 10.5MTPA for grey cement and 1.2MTPA of white cement generates its revenues mainly from the northern and western belt of the country.
For the year FY15 northern region contributed about 57% of revenues from grey cement while west, south and central contributed 19%, 15% and 9% respectively. Share of grey cement in gross sales was 72% for the year FY15 and that for white cement was 28%.
In the year FY15 Company operated at a capacity utilization of 60% cement and about 82% for white cement. However, we expect the company to improve its capacity utilization going ahead. For FY16 w margins to increase to 13.2%, blended volume growth at 9% and blended realizations to increase by 4%.
Valuations: We have valued stock on EV/EBITDA of 17(x) its FY16 estimates and have arrived at a fair value of Rs 757 per share. At CMP of Rs 677 the stock is available at FY16E P/E(x) and EV/EBITDA(x) of 65.6x and 15.8x respectively. We recommend to Hold the stock with a price target of Rs. 757.
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