Accumulate JK Cement Ltd.for Target Rs.4,413 by Elara Capital
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Year-end provisions dent margin
Performance along expected lines
JK Cement (JKCE IN) Q4FY24 net sales grew ~8% YoY and ~6% QoQ to ~INR 28bn. Further, EBITDA increased ~51% YoY but declined ~10% QoQ to ~INR 5.5bn. Net sales and EBITDA were broadly in line with our estimates of ~INR 29.0bn and ~INR 5.6bn, respectively. Adjusted PAT surged ~54% YoY but fell ~21% QoQ to ~INR 2.3bn.
Blended EBITDA/tonne rises ~35% YoY but falls ~19% QoQ
Blended sales volume improved ~12% YoY and ~11% QoQ to 5.09mn tonne. Blended realization was down ~3% YoY and ~5% QoQ to INR 5,551/tonne. Blended operating cost declined ~7% YoY and ~1% QoQ to INR 4,697/tonne. Q4FY24 operating cost was inflated due to 1) increased spending toward branding (primarily related to dealers’ annual conference), 2) higher spend toward IT upgradation, and 3) payment of incentives to employees. Thus, blended EBITDA/tonne was up ~35% YoY but down ~19% QoQ to INR 1,075.
The ongoing work on a 2.0mn-tonne grinding capacity unit at Prayagraj in Uttar Pradesh is likely to be completed by Q2FY25. Further, construction work has started on an upcoming clinker and cement capacity of 3.3mn tonne and 1.0mn tonne, respectively, at Panna in Madhya Pradesh. Total capex of this project will be ~INR 23bn and the units should be operational by Q2-Q3FY26.
Valuation: reiterate Accumulate and TP of INR 4,413
Around 86% of JKCE’s grey capacity is in North India, Central India and Gujarat. These regions are likely to operate at higher utilization levels than all-India and thereby likely to earn better profitability. Also, we believe gradual completion of ongoing capex will be the key volume driver. Further, lower fuel prices and other cost savings initiatives should help JKCE on the cost front. Management expects ~INR 150-200/tonne of cost savings in the next two years, led by freight cost optimization and increased use of green power & alternative fuels. Therefore, we reiterate Accumulate. We pare down our EBITDA ~7% for FY25E and ~2% for FY26E to factor in weakness in cement prices. However, as we roll over to March 2026E from December 2025E, our SOTP-based TP remains unchanged at INR 4,413. We ascribe 12x March 2026E EV/EBITDA to grey cement, 18x March 2026E EV/EBITDA to white cement (including wall putty) and 15x March 2026E EV/EBITDA to the paint business.
Please refer disclaimer at Report
SEBI Registration number is INH000000933
