JK Lakshmi Cement - In-line quarter; attractive valuation - ICICI Securities

JK Lakshmi Cement's (JKLC) Q3FY21 standalone EBITDA at Rs1.9bn (up 26% YoY) was broadly in-line with our/consensus estimates. Volumes grew 16% YoY in Q3FY21 and the management expects similar growth trajectory to continue in coming quarters. Blended realisation was up 2.5% YoY with EBITDA/te inching up 9% YoY to Rs712/te. With strong cashflow generation, consolidated net debt declined Rs1.8bn QoQ (Rs5bn in YTDFY21) to Rs10.2bn as of Dec'20. UCWL's (73% subsidiary) 2.5mnte brownfield expansion is likely to complete by Dec'24. We broadly maintain our FY21-23E estimates with target price unchanged at Rs475/sh (7xSep'22E EV/E). Maintain BUY. Key risk: Lower demand / pricing.

- Standalone revenue up 19% YoY to Rs11.9bn (I-Sec: Rs11.5bn). Total volumes (including clinker) increased 16% YoY to 2.7mnte, in-line with our estimates. Management expects demand momentum to continue given strong rural housing and government infrastructure demand, and believe similar growth trajectory can sustain in coming quarters. Blended realisation increased 1% QoQ / 2.5% YoY to Rs4,426/te owing to higher prices in North. Management believes most of the capacities in North and East are currently running near full utilisation and hence, this should result in seasonal price hikes soon. Prices have seen some improvement in Gujarat and have remained broadly flat in JKLC's key markets of North and East regions in Jan'21.

- Standalone EBITDA/te increased 9% YoY to Rs712/te (I-Sec: Rs664/te) owing to higher realisation. Total cost/te increased 1% YoY and 3% QoQ to Rs3,714/te. Raw material plus power & fuel cost/te remained broadly flat QoQ owing to low cost fuel inventory. Freight cost/te increased 2% YoY/ 6% QoQ owing to higher lead distance. Employee expenses grew 11% YoY owing to higher managerial remuneration, while other expenses grew 17% YoY and 30% QoQ owing to higher ad spends and Rs100mn payment to consultant for improving cost efficiencies.

- Consolidated revenue grew 17% YoY to Rs12.6bn while EBITDA and PAT increased 29% YoY and 2.3x to Rs2.3bn and Rs1.1bn, respectively. Consolidated volumes grew 13% YoY to 2.8mnte with 14% YoY increase in EBITDA/te to Rs814/te. UCWL EBITDA increased 46% YoY to Rs364mn in Q3FY21.

- UCWL plans to set up 1.5mnte clinker unit along with WHRS at its existing location in Udaipur, Rajasthan with 2.5mnte split grinding units (location yet to be finalised) at a capex of Rs15bn, to be commissioned by Q3FY24. The project is likely to be funded via 2:1 debt: equity. Management is also evaluating equity issuance at UCWL preferably through rights issue to fund the project. UCWL's de-bottlenecking project of increasing its clinker capacity from 1.2mnte to 1.5mnte and grinding capacity from 1.6mnte to 2.2mnte is likely to commission by Mar'21.

Shares of JK LAKSHMI CEMENT LTD. was last trading in BSE at Rs.350.2 as compared to the previous close of Rs. 334.55. The total number of shares traded during the day was 46730 in over 1313 trades.

The stock hit an intraday high of Rs. 354.3 and intraday low of 337.75. The net turnover during the day was Rs. 16221314.

Source : Equity Bulls

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