Buy JK Lakshmi Cements; target of Rs 355: Geojit

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Geojit's research report on JK Lakshmi Cements

Q1FY21 revenue de-grew by 20.8%YoY due to 18%YoY decline in volumes (Vs industry de-growth of 38%YoY) on account of Covid-19 led disruption in supply chain. EBITDA declined by only 15.6%YoY aided by 110bps improvement in EBITDA margin mainly due to reduction in fuel, freight & other expenses. 10MW Waste Heat Recovery (WHR) by 2QFY22 will bring additional cost savings. Debt repayment of ~Rs200p.a will add to earnings growth. JKLC is likely to announce a brownfield expansion (1.5MT clinker & 2.5MT grinding) with a capex of Rs.12-14bn in the coming quarter which will trigger for next stage of growth. We factor volumes to de-grow by ~7% in FY21 but to grow by 12% in FY22E, expect Revenue/PAT to grow at 2%/6% CAGR over FY20-22E. JKLC currently trades at 6.4x 1Yr Fwd EV/EBITDA. We value at 6.5x FY22E EV/EBITDA (2Yr Avg-8.6x).

Outlook

We upgrade to Buy rating with a revised Target of Rs.355 due to better than expected volumes amid challenges and attractive valuation.

For all recommendations report, click here

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