Emkay Global Financial has given Hold recommendation for JK Cement with a target price of Rs. 2600 in its research report issued on Aug 16, 2022
Emkay Global Financial’s research report on JK Cement
JK Cement’s Q1FY23 standalone EBITDA was flat YoY at Rs4bn, standing 14%/19% above consensus/our estimates owing to lower-than-expected increase in cost/ton. Accordingly, blended EBITDA/ton fell 15% YoY to Rs1,124 (Emkay Est: Rs945). Management mentioned that impact of the high-cost fuel inventory is likely to reflect in Q2 and profitability would sharply decline sequentially in Q2FY23. Over 50% of the equipment erection work and the entire civil work are complete at the 4mt green-field Panna plant; Mgmt expects to commission the project by Mar’23. This is likely to drive grey-cement volume CAGR of ~11% over FY22-25E.
Factoring in the lower opex/ton, we raise FY24-25E EBITDA by 4% and TP to Rs2,600 (from Rs2,360) post the quarterly roll-over to Sep’23. Our DCF-based TP implies 1-year fwd EV/EBITDA of 11x. Maintain Hold, as the risk-reward appears to be balanced.