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Strong volume ramp-up

JK Cement’s (JKCE) Q4FY21 standalone adjusted EBITDA at Rs4.8bn (up 38% YoY), was broadly in line with consensus estimates. Grey cement volumes including clinker sales showed strong growth at 48% YoY and 23% QoQ implying 2-year CAGR of 18%. However, grey cement realisation declined 1.6% QoQ and, with increasing share of grey cement volumes, blended EBITDA/te fell 5% YoY and 13% QoQ to Rs1,228/te. Ground-breaking ceremony for 4mnte greenfield expansion (capex: Rs30bn) at Panna was held on 5th May’21, and the project is expected to be operational by H1FY24. Accordingly, JKCE is likely to post industry-leading volume growth over next few years backed by strong expansion plans. Consolidated net debt declined by Rs6.5bn to

Standalone revenues increased 39% YoY to Rs20.3bn, in line with estimates.

Grey cement volumes including clinker sale of 0.22mnte increased 48% YoY and 23% QoQ to 3.5mnte (2-year CAGR of 18%) implying ~95% utilisation of the expanded capacity including South. Realisation fell 1.6% QoQ at Rs4,416/te owing to higher clinker sales QoQ and volume push. White cement and wall care putty volumes grew 29% YoY (2-year CAGR of 6%) to 0.39mnte, while realisation was up 1.5% YoY / 2.6% QoQ at Rs12,262/te. Other operating income rose 28% YoY to Rs240mn led by higher volumes. Despite covid-related disruptions, JKCE increased its grey cement volumes by 21% YoY in FY21 aided by capacity expansion.

Standalone adjusted EBITDA up 38% YoY to Rs4.8bn (I-Sec: Rs5.07bn).

Blended cost/te declined 4.7% YoY / 2.3% QoQ owing to better operating leverage. Other expenses/te declined 12% YoY owing to better operating leverage; however, it increased 8% QoQ on higher packing costs and marketing expenses. Other expenses included Rs390mn towards impairment of old power assets, which we have adjusted for arriving at recurring EBITDA. Assuming 28-29% EBITDA margins for white cement / putty, implied grey cement EBITDA/te works out to Rs966-980/te. During the quarter, JKCE recognised provision towards diminution of carrying amount of investment in J.K. Cement (Fujairah) FZC, amounting to Rs1.7bn. Adjusted PAT grew 51% YoY to Rs2.7bn (I-Sec: Rs2.8bn).

Consolidated net debt fell from Rs23.2bn in FY20 to Rs17bn in FY21 

resulting in lower net debt/EBITDA (down to 1.1x from 1.9x as at Mar’20). Strong consolidated OCF of Rs14.1bn included working capital release of Rs1.7bn .

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