Buy JK Lakshmi Cement; target of Rs 370: Prabhudas Lilladher

Prabhudas Lilladher's research report on JK Lakshmi Cement

JK Lakshmi Cement (JKLC) posted strong set of Q1FY21 earnings. EBITDA came above our/consensus estimates (CE) by 10%/24%, driven by better than expected realisations. Strong profitability in North and Gujarat regions helped company to balance the weakness in Eastern region (24% of total volumes). Tight demand-supply market conditions would help sustain margins in North and Gujarat regions. East region would witness flooding of capacity addition over next couple of years. However, we do not expect further deterioration in region’s margins due to unsustainable RoEs and industry consolidation. Commissioning of CPP, WHR and split grinding unit at Odisha further boosted the cost competitiveness of its East operations. To factor higher realisations and better growth in volumes, we upgrade our EBITDA estimates of FY21e/FY22e by 6.0%/4.6%.

Outlook

We remain upbeat on JKLC on the back of strong outlook on its North and Gujarat markets, ample scope for capacity augmentation and attractive valuations (EV/EBITDA: 5.2x FY22e). We maintain BUY rating with revised TP of Rs370 (earlier Rs350).

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More