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4QFY21 largely in-line; risk-reward appears balanced; Hold

* Standalone adjusted EBITDA increased 38% YoY to Rs4.8bn, while blended EBITDA/ton declined 5% YoY/13% QoQ to Rs1,228 - both in line with our and consensus estimates.

* We broadly maintain FY22 and FY23 estimates, factoring in 13% EBITDA CAGR. JKCE’s RoIC was reset to around 16% in FY21 vs. <10% till FY19, and we expect it to improve to 20% in the next 4-5 years and sustain at that level in the long term.

* Our DCF-derived TP remains unchanged at Rs3,000 (Jun’22E), implying 12x forward EV/EBITDA. Maintain Hold as the valuation rerating is largely over and risk-reward appears balanced.

* Earnings conf. call is scheduled for 14th Jun, 4PM (9122 6280 1143/7115 8044).

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

* Grey cement volume (including clinker) increased 48% YoY to 3.5mt and was significantly ahead of industry average on capacity expansion and higher clinker sales (+2.3x YoY to 0.22mt). Grey cement realization declined 1.6% QoQ in Q4FY21 (4.4% YoY) vs. our estimate of broadly flat realization owing to increase in share of non-trade sales to 37% (+600bps YoY and 300bps QoQ) and higher clinker sales. White cement plus wall care putty volumes increased 29% YoY to 0.39mt, with realization increasing 1.5% YoY/2.5% QoQ in Q4FY21.

* Adjusted standalone EBITDA increased 38% YoY to Rs4.8bn.

Blended cost/ton declined 5% YoY/2% QoQ (Emkay: 4% YoY decline) due to lower-than-expected increase in input cost. Other expenses include a one-time charge of Rs390mn toward impairment of CPP as a result of fire at Mangrol. Adjusted PAT increased 63% YoY to Rs2.9bn. Exceptional items of Rs2.3bn also include Rs1.7bn provision toward the UAE subsidiary and Rs220mn tax relating to earlier years under the Sabka Vishwas scheme.

* FY21 review:

Standalone revenues increased 15% YoY, led by 19% YoY increase in volumes and 3% YoY decline in blended realization. Consolidated EBITDA increased 30% YoY to Rs15.8bn, with blended EBITDA/ton increasing 11% YoY to Rs1,320. JKCE made an additional investment of Rs1.5bn in subsidiaries/associates in FY21. Consolidated FCF stood at Rs6.5bn post capex of Rs7.6bn in FY21. Accordingly, net debt declined to Rs18bn with ‘net debt-to-EBITDA’ at 1.2x in Mar’21 (1.9x in Mar’20).

Project updates:

The groundbreaking ceremony for the greenfield capacity expansion (4mt) at Panna was held in May’21. Boundary wall work is progressing, while civil & mechanical contractors have been finalized and orders have been placed for main equipment. JKCE spent Rs2.7bn on this project till FY21. The modernization of 0.3mt plant at Nimbahera is expected to be completed in Q2FY22.

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