Dolat Capital recommended accumulate rating on JK Lakshmi Cement with a target price of Rs 334 in its research report dated August 07, 2020.
Dolat Capital's research report on JK Lakshmi Cement
JKLC reported mix set of result. Revenue, APAT and volumes were above estimates however, EBITDA/tn below estimates. JKLC posted 20.8%/ 15.6%/ 36.2% YoY de-growth in revenue/ EBITDA/ APAT to Rs8.3 bn/ Rs1.4 bn/ Rs444 mn in Q1FY21 due to 18.0% YoY de-growth in volumes coupled with decline in realization by 3.4% YoY (+0.3% QoQ). We expect 1.7%/ 2.2%/ (1.0%) revenue/ EBITDA/ APAT CAGR over FY20-22E led by (8.3%)/ 11.2% volume growth and (0.5%)/ 2.0% cement realization growth in FY21E/ FY22E. We increase our revenue/ EBITDA/ APAT estimate by 8.5%/ 18.8%/ 56.1% for FY21E considering Q1FY21 results. However, we broadly maintain our FY22E estimates.
Outlook
We factor JKLC to start doing capex by Q3FY21E for brown-field expansions to capture growth in demand. Considering, stock has run up ~39% since our Q4FY20 result update dated 21 May’20 we downgrade to Accumulate with a revised SOTP of Rs334 based on (6.5x standalone FY22E EV/EBITDA, 50% of FY22E Capital WIP and JKLC’s 72.5% stake in Udaipur Cement Works at 30% holding discount).
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