Accumulate JK Cement for target Rs. 4,413 - Elara Capitals
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Margin at three-year high
Operationally as expected
JK Cement’s (JKCE IN) Q3FY24 net sales grew ~18% YoY/9% QoQ to ~INR 26.9bn. Further, EBITDA jumped ~147% YoY/36% QoQ to ~INR 6bn. Net sales and EBITDA were broadly in line with our estimates of ~INR 27bn/INR 5.8bn, respectively. Adjusted PAT surged ~329% YoY/62% QoQ to ~INR 2.9bn.
Blended EBITDA/tonne at INR 1,330 likely to be in top quartile
Grey cement volume rose ~14% YoY/6% QoQ to 4.15mn tonnes, and white cement (including wall putty) volume was up ~10% YoY/3% QoQ to 0.42mn tonnes. Grey cement realization rose ~6% YoY/4% QoQ to INR 5,164/tonne. White cement (including wall putty) realization was flat YoY but grew ~2% QoQ to INR 12,870/tonne. Blended operating cost fell ~8% YoY/3% QoQ to INR 4,756/tonne. Thus, blended EBITDA/tonne, including other operating income, grew ~118% YoY/29% QoQ to INR 1,330. EBITDA/tonne reported by JKCE is the highest in the past three years and may be in top quartile.
Grey cement capacity to rise ~36% by FY26E from current level
The 1.5mn tonnes grinding unit at Ujjain (Madhya Pradesh) was commissioned in end-November 2023. And 2mn tonnes capacity at Prayagraj (Uttar Pradesh) may start by Q2FY25. JKCE announced new growth projects at ~INR 28.5bn capex:1) 3.3mn tonnes clinker expansion at Panna (Madhya Pradesh), 2) cement expansion of 1mn tonne each at Panna, Hamirpur (Uttar Pradesh) and Prayagraj and 3) 3mn tonnes greenfield grinding unit in Bihar. These may be completed in a phased manner by end-FY26.
Valuation: Reiterate Accumulate; TP raised to INR 4,413
Better demand and completion of ongoing projects in the next few months may prop near-term volume. Phase-wise completion of newly announced projects in the next few years bodes well for long-term volume. Lower fuel prices, cost savings measures may contribute to enhanced cost optimization. We reiterate Accumulate and up FY24E/25E/26E EBITDA ~14%/13%/12%. We roll over to December 2025E from September 2025E. And we raise SoTP-TP to INR 4,413 from INR 3,823. We ascribe 12x (unchanged) Dec-2025E EV/EBITDA to grey cement, 18x (unchanged) Dec-2025E EV/EBITDA to white cement (including wall putty) and 15x (unchanged) Dec-2025E EV/EBITDA to the paint business.
Please refer disclaimer at Report
SEBI Registration number is INH000000933
