ICICI Direct is bullish on JK Cement has recommended buy rating on the stock with a target price of Rs 1150 in its research report dated May 22, 2019.
ICICI Direct's research report on JK Cement
JK Cement reported a strong operational performance for Q4FY19 broadly meeting our topline estimates and beating the EBITDA, PAT expectations. Revenues posted 13.4% growth YoY to Rs 1492 crore (above I-direct estimate of Rs 1433.6 crore) led by a healthy mix of realisation and volume growth. Volumes were at 2.88 MT for Q4FY19, up 5.8% YoY (above I-direct estimate of 2.81 MT) while realisations grew 7.1% YoY to Rs 5,182/t (vs. I-direct estimate of Rs 5,102/t). On the profitability front, EBITDA margins expanded 491 bps YoY to 18.7% (vs. I-direct estimate of 18%) while absolute EBITDA of JK Cement witnessed 53.6% growth in EBITDA to Rs 279.5 crore led by higher EBITDA margins. Led by a strong operational performance, PAT grew 55% YoY to Rs 150 crore vs. I-direct estimate of Rs 128 crore.
Outlook
With additional capacity coming in, the debt could increase to ~Rs 3200 crore in FY20E. However, improvement in margins and continued demand momentum on the back of infrastructure projects and housing should help the company manage to keep the debt/EBITDA of FY21E at similar levels of FY19. Hence, we value JK Cement at 9.2x Fy21E EV/EBITDA. We upgrade the stock to BUY recommendation with a target price of Rs 1,150.
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