"India’s specialty chemicals industry is a decadal growth opportunity and it is still not too late to participate in the value creation process. We prefer CRAMS/CSM players Navin Fluorine (Navin) and PI Industries (PI) as they provide long-term earnings visibility. We also like UPL due to robust growth outlook and reducing debt concerns and SRF due to rising contribution from the chemicals business," JM Financial research report.
Geojit's research report on JK Lakshmi Cements
JK Lakshmi Cement (JKLC) is part of JK group mainly focused in North, West and Eastern regions of India with a consolidated capacity of 14MT. We revise our Target to Rs.552 (from Rs.470) upgrade to Buy rating considering the capacity expansion and attractive valuation. Q4FY22 revenue grew by 13%YoY aided by the volume growth of ~7%YoY and realisation growth of 6%YoY. EBITDA margin declined to 18.4% from 20.3%YoY (12.3% QoQ) due to the surge in costs partially offset by higher realisation. JKLC’s subsidiary (UCWL) is expanding its capacity by 2.5MT with a capex of Rs.16.5bn (D/E of 70:30), expected to be commissioned by FY24. Pressure on margins due to the sharp surge in fuel costs will be reduced by price hikes and cost reduction initiatives like Waste Heat Recovery. JKLC currently trades at 7x 1Yr Fwd EV/EBITDA. We value at 6x FY24E EV/EBITDA (3Yr Avg=7x) considering the current input price inflation.
Outlook
The stock currently trades at 7x 1Yr Fwd EV/EBITDA. Considering the current input price inflation, we value at 6x FY24E EV/EBITDA (3Yr Avg=7.4x) to arrive at a revised Target of Rs.552 (earlier Rs.470). Upgrade to Buy rating considering the capacity expansion and attractive valuation.
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