MOSL: J K CEMENT (Buy)-Well placed to benefit from exposure to North India
J K Cement: Well placed to benefit from exposure to North India
(JKCE IN, Mkt Cap USD1.5b, CMP INR1418, TP INR1660, 17% Upside, Buy)
New capacities to drive earnings
- J K Cement’s (JKCE) 3QFY20 results reflect the benefit of the company’s strong exposure to North India, our preferred regional market. EBITDA/t increased 29% YoY, led by 8% YoY increase in realizations.
- We maintain our FY20/FY21 estimates and our Buy Moreover, JKCE’s new capacities should lead to volume and earnings growth.
EBITDA in line; PAT beat led by higher other income
- In 3QFY20, grey cement volumes (incl. clinker) increased 3% YoY to 2.2mt while white cement volumes were flat YoY to 0.35mt.
- Combined realizations stood at INR5,490/t (+8% YoY, -2% QoQ). Revenue increased 10% YoY to INR14b (in-line).
- Cost/t at INR4,404/t increased 4% YoY/-1% QoQ, higher than our est. INR4,291/t. EBITDA/t stood at INR1,086 (+29% YoY,-4% QoQ). EBITDA was in line with est. at INR2.8b (+32% YoY/+9% QoQ). Margins came in at 19.8% (+3.24pp YoY, -0.48pp QoQ).
- Other income was 39% higher than est. at INR237m. Tax rate was at 27.5% in the quarter, as against 48% in the year-ago period. PAT grew 126% YoY to INR1.37b (v/s est. INR1.2b).
- The company has commissioned 1mt/1.5mt grey cement grinding unit at Mangrol (Rajasthan)/Aligarh (UP) on 3rd Feb’20.
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.
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