ICICI Direct has given Hold recommendation for JK Cement with a target price of Rs. 2850 in its research report issued on Jun 15, 2021

ICICI Direct’s research report on JK Cement

JK Cement’s performance remained weak operationally in Q4FY21. While sales volume grew 45.8% YoY 3.89 MT (vs I-direct estimate: 3.87 MT), realisations dipped 4.7% YoY (down 5.1% QoQ) to Rs 5,271/t that restricted revenue growth to 38.8% YoY at Rs 2052.5 crore (vs. I-direct estimate: Rs 2151.1 crore). Grey cement volumes were up 48.1% YoY to 3.5 MT whereas white cements sales grew 29.4% YoY to 0.39 MT. Cost of production broadly stayed flat QoQ at Rs 4143/t. However, lower realisations led to 204 bps YoY drop in EBITDA margins (down 411 bps QoQ). EBITDA/t was at Rs 1,128/t vs Rs 1,297/t last year and Rs 1416/t last quarter. PAT of Rs 63.4 crore also stayed far lower than estimate of Rs 261.2 crore as the company booked impairment loss of Rs 166.9 crore w.r.t. its UAE subsidiary. On the b/s front, gross debt has increased from Rs 2,594 crore last year to Rs 2,841 crore in FY21 owing to capital expenditure. Post addition of 4.2 MT cement capacity in FY21, the company would now set-up 4 MT integrated grey cement capacity at Panna MP with split grinding unit in Uttar Pradesh and 12 MW WHRS plant for capex of Rs 2970 crore (i.e. at $103/t). Completion is likely by H2FY24E.


Post the recent run up in the stock price, we now downgrade our rating from BUY to HOLD with a revised target price of Rs 2850/share (valuing at 13x FY23E EV/EBITDA, earlier TP Rs 2950).