Hold JK Cement; target of Rs 2725: Emkay Global Financial

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Emkay Global Financial's research report on JK Cement

JK Cement’s Q2FY23 standalone EBITDA declined 16% YoY and 26% QoQ to Rs3bn, standing 7-10% above consensus’ and our estimates owing to better-than-expected performance in the wall-putty and white-cement businesses. Blended EBITDA/ton fell 24% YoY/28% QoQ to Rs814 (Emkay Est: Rs750). The Board has approved cement-capacity expansion of 5.5mt and clinker capacity-addition of 0.66mt at a capex of Rs11.6bn (US$26/ton) over the next two years. Accordingly, Company has revised upward its capex guidance to Rs19bn/Rs14bn vs earlier guidance of Rs17bn and Rs11bn for FY23 and FY24, respectively. Net debt increased by Rs8bn in H1FY23, to Rs29bn as of Sep-22, and Management expects peak net debt of ~Rs35bn by Jun-23. Factoring-in the Q2 beat and higher volume growth with the capacity addition announcement, we increase our EBITDA estimates for FY24-25 by ~5%.

Outlook

We maintain HOLD on the stock, with a revised Sep-23 TP of Rs2,725/share (Rs2,600 earlier). Our DCF-based-TP implies 1-yr forward EV/EBITDA of 11x.

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JK Cement - 15 -11-2022 - emkay