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Chola Securities
JK Cement (Underperformer)
Target: ₹2,836
CMP: ₹3,156.15
JK Cement delivers a good set of numbers for Q1-FY22 on all-front as blended volumes recoup amidst controlled cost environments. JK Cement has reported a standalone revenue growth of 69.3 per cent y-o-y to ₹1,630 crore. EBITDA jumped by 85.6 per cent y-o-y to nearly ₹400 crore with margin expansion of about 220 bps at 24.5 per cent.
The low base effect aided the overall performance on y-o-y basis as PAT more than doubled, also partly aided by lower tax.
Unabated capacity expansion plans despite recent unprecedented business conditions and streamlining of grey segment are expected to auger well for JK Cement in the subsequent years. Entry into high-growth central region will diversify the business with increased market share.
Intensive efforts taken to improve green energy usage and highly efficient new plants post commissioning will lead to reduced costs. JK Cement's high-margin white business is expected to solidify going ahead.
All the near-term levers seem to be already priced in. Hence, we revise our rating on stock to Underperformer from Outperformer and revise target price to ₹2,836 (previous target ₹2,953), valuing the company at 12x FY23E EV/EBITDA.
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