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Both segments continue to perform

JK Cement delivered strong volume growth across both grey (+25% YoY) and white/putty (+17% in India) segments, gaining market share. Healthy realization across both segments and increased grey cement productivity (from new capacity) drove margin expansion. Subsequently, consolidated Revenue/EBITDA/APAT rose 25/56/75% YoY to Rs 18.3/4.5/2.2bn resp. We continue to like JKCE for its continued healthy traction across both its segments. We maintain BUY rating on the stock with a revised target price of INR 2,545/share (10.5x Dec’22E consolidated EBITDA).

* 3QFY21 performance: Grey cement volumes rose 25% YoY on production ramp-up from new expansions in north. NSR growth remained firm at 4%. In our view, grey segmental unitary EBITDA rose 60% YoY to INR 1,040/MT, on healthy pricing and lower opex. Grey EBITDA thus doubled YoY to INR 2.9bn. In the white/putty segment strong 17% YoY domestic volume uptick boosted total segmental volumes by 10% YoY, driving up segmental EBITDA by ~13% YoY to INR 1.6bn. Strong fixed costs controls and higher utilisation across both business segments and increased efficiencies from new grey cement plants offset impact of rising fuel prices.

* Capex update and Outlook: JKCE expects to complete clinker debottlenecking in Rajasthan by 2QFY22. Its 4mn MT green-field expansion in Panna, MP (INR 29.5bn capex) is expected to be completed by 1HFY24E. In the interim, capacity expansions across both grey and white/putty segments will continue to drive volume growth and margin expansion. We raise our FY21E/22E/23E EBITDA estimates by 3/4/4% respectively on strong volume and cost performance. We maintain BUY on JKCE with a higher target price of INR 2,545/sh (10.5x Dec’22E consolidated EBITDA).

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