SBICap Securities

JK Lakshmi Cement (Hold)

CMP: ₹250.45

Target: ₹228

JK Lakshmi Cement’s 1QF15 operating performance (adjusted) was ahead of our expectations as realisation jumped strongly by 20 per cent y-o-y to ₹3,878/tonne even as cement volume growth was around 10 per cent less than expected. Ready-mix cement revenues too jumped by 20 per cent y-o-y to ₹42 crore. Buoyant prices in the operating regions of JKLC, North and West India, caused realisations to rise. Consequentially sales revenue jumped a healthy 21 per cent y-o-y to ₹600 crore (SBICap estimate ₹590 crore). The adjusted EBITDA too rose strongly by around 84 per cent y-o-y to ₹130 crore (SSLe of ₹114 crore) due to lower-than-expected cost inflation. However, the margins gain was limited to 160 bps q-o-q (17.3 per cent in 4QF14). Adjusted PAT ended with gains of 227 per cent y-o-y to ₹51.4 crore. We value JKLC on the replacement cost basis with base cost assumption of ₹750 crore/tonne. We are valuing JKLC by assigning 40 per cent discount to the replacement cost. We have arrived at the revised target price of ₹228 (₹170 earlier) based on 1-year forward capacities.

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