MOSL: J K CEMENT (Buy)-Marginal miss on profitability, new capacities to drive growth
J K CEMENT: Marginal miss on profitability, new capacities to drive growth
(JKCE IN, Mkt Cap USD1.3b, CMP INR1181, TP INR1370, 16% Upside, Buy)
- Volumes/revenue in line: Grey cement volumes (incl. clinker) increased 2% YoY to 1.9mt (in-line), while white cement volumes were up 13% YoY to 0.33mt in 2QFY20. Combined realizations stood at INR5,604/t (+10% YoY). Revenue increased 14% YoY to INR12.5b (our estimate: INR12.3b).
- Higher-than-estimated cost leads to a miss on margins: Cost/t was up 4% YoY to INR4,469 (our estimate: INR4,337). Thus, EBITDA/t of INR1,135 (+44% YoY) was lower than our estimate of INR1,196. EBITDA grew 50% YoY to INR2.5b (marginal miss), with the margin at 20.3% (+4.8pp YoY). Tax rate was at 34% versus 20% in 2QFY19. PAT grew 68% YoY to INR1.1b (our estimate: INR1.2b).
- 1HFY20 performance: Sales/EBITDA/PAT were up 17%/74%/2.3x YoY. Operating cash flow post working capital and taxes increased 3x to INR4.4b, led by an improvement in working capital. For 2H, we expect sales/EBITDA/PAT to increase 9%/26%/24% YoY.
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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