Maintain BUY on JK Cement - Robust volume and utilisation - HDFC Securities

Mr. Rajesh Ravi, Institutional Research Analyst, HDFC Securities and Mr. Saurabh Dugar, Institutional Research Analyst, HDFC Securities

JK Cement (JKCE) delivered strong volume growth across both grey (+48% YoY) and white & putty (+24%) segments, aided by healthy demand and low base effect. Thus, despite fuel cost pressure, segmental EBITDAs (grey/white & putty) firmed up 37/40% YoY respectively in 4Q. Ahead of its major expansion in central region, JKCE's net debt/EBITDA has cooled off to 1.2x, suggesting that balance sheet would remain under check. We expect JKCE's robust show across both businesses to continue. We maintain BUY rating on the stock with an unchanged TP of INR 3,070/share (11.5x Mar'23E consolidated EBITDA).

4QFY21 performance across both businesses: Grey cement volumes soared 48% YoY, driving up utilisation to 95% (its best in more than a decade). Higher clinker and non-trade sales moderated NSR 2/5% QoQ/YoY. In our view, segmental unitary EBITDA (adj for INR 390mn write-off) fell 6/8% QoQ/YoY to INR 976/MT on rising fuel costs and sales from old plants. Thus, grey EBITDA rose ~37% to INR 3.4bn. In the white & putty segment, consolidated volume rose 24% on solid domestic demand. This drove up segmental EBITDA by 40% YoY to INR 1.4bn. Thus, consolidated revenue/adj EBITDA/APAT firmed up 38/37/57% YoY in 4QFY21.

Capex update and outlook: JKCE's FY21 consolidated EBITDA firmed up 31%, led by 45/8% YoY growth in grey/ white & putty EBITDAs. Further, lower WC and Capex outgo drove 16/540% jump in FY21 OCF/FCF to INR 15.9/8.3bn respectively. Thus, net debt/EBITDA cooled off to 1.2x vs 2.1x YoY. Robust cash flow outlook should keep its balance sheet under check as JKCE will execute its 4mn MT greenfield expansion in Panna, MP (INR 29.5bn Capex) by 1HFY24E. In 1HFY22E, JKCE will complete the debottlenecking in Rajasthan, which will boost both volume and margins.

Shares of J.K.CEMENT LTD. was last trading in BSE at Rs.2788.85 as compared to the previous close of Rs. 2811.45. The total number of shares traded during the day was 5255 in over 1182 trades.

The stock hit an intraday high of Rs. 2814.95 and intraday low of 2760. The net turnover during the day was Rs. 14633139.

Source : Equity Bulls

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