MOSL: JK CEMENTS (Buy): Increasing utilization setting good stage for rapid capacity expansion
MOSL: JK CEMENTS (Buy): Increasing utilization setting good stage for rapid capacity expansion
(JKCE IN, Mkt Cap USD1b, CMP INR944, TP INR1155, 22% Upside, Buy)
- Grey cement utilization now at 96%; white cement volume growth healthy: Grey cement volumes (incl. clinker) increased by 5.5% YoY to 2.53mt (~96% utilization), while white cement volumes were up 9% YoY to 0.35mt in 4QFY19. Combined realizations stood at INR5,182/ton (+7% YoY). Revenue increased 13% YoY to INR14.9b (in-line) in the quarter.
- Healthy realizations boost profitability: Blended EBITDA/t increased 45% YoY to INR971 due to healthy realization, partially offset by a marginal rise in cost/t. EBITDA grew 54% YoY to INR2.8b (in-line), with the margin expanding 4.9pp YoY to 18.7%. Tax rate was at 29% in the quarter, as against 22% in the year-ago period. Consequently, PAT grew 43% YoY to INR 1.5b (in-line).
- FY19 performance: Volumes grew 5% YoY, while net sales were up 8.5% to INR50b. EBITDA increased 7% to INR8.1b. PAT was up 6% to INR3.25b.
- Concall highlights: (1) Expansion plans are at advanced stages of execution – expect commissioning of (a) the clinker line and the 2mt brownfield grinding units by Sep’19, (b) the greenfield grinding unit in Aligarh by Dec’19 and in Gujarat by Mar’20. (2) Taking various initiatives to improve profitability, JKCE has achieved savings of INR50/t in FY19 via logistics optimization and INR250m via AFR usage. (3) The company has guided for growth 10-12% in the grey cement business and ~10% in the white cement business in FY20.
J.K. Cement Limited is an India-based holding company. The Company is engaged in manufacturing cement and cement products. Its product portfolio includes grey cement, white cement and wall putty. It offers a range of grey cement, which include Portland Pozzolana cement (PPC), ordinary Portland cement (OPC) and Portland slag cement. Its white cement portfolio includes J.K. White Cement, J.K. Wall Putty, J.K. Waterproof and J.K. Primaxx. It white cement is used for decorative and architectural applications. J.K. Wall Putty is a white cement based fine powder, which provides a base for concrete/cement plastered walls and ceilings. J.K. Water Proof is a water repellant powder, which prevents passage of water through pores and capillaries of the concrete. JK PRIMAXX is a product used for interiors and exteriors. Its grey cement plants are located in Rajasthan and Karnataka. Its white cement and white cement-based wall putty plants are located in Rajasthan and Madhya Pradesh.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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