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Results beat; maintain Buy
* JK Cement (JKCE) reported EBITDA of Rs2.8bn vs. our estimate of Rs2.6bn and blended EBITDA/ton of Rs971 vs. our estimate of Rs886 as grey cement realization growth came in at 6% qoq compared with our estimate of 3% qoq growth.
* Sales volume of grey cement was up 5.4% yoy. Realization was up 7.9% yoy/6% qoq, led by higher cement prices in the South region and the company’s efforts to cater to lucrative markets in the North. Sales volume of white cement was up 8.7% yoy.
* JKCE is expanding its grey cement capacity by 4.2mt, which will be completed in FY20. We expect 12%/18% yoy growth in grey cement sales volume in FY20/21E. Cost improvement measures have led to freight and energy cost savings.
* We upgrade FY20/21 EBITDA estimates by 19.6%/8%, factoring in higher sales volume and cement prices. JKCE remains a preferred pick in the mid-cap space and we maintain Buy with a revised target price of Rs1,059 (10x/9x EV/EBITDA for white/grey segments).
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