Buy JK Cement Ltd For the Target Rs.5,532 by Choice Broking Ltd
Surpassed street expectations on all front
JKCE announced its Q3FY25 results yesterday, reporting a flattish revenue on YoY.
* Q3FY25 consolidated revenues at INR29,303 Mn, (vs CEBPL est. INR28,890 Mn), was down 0.2% YoY and up 14.5% QoQ. Total volume for Q3 stood at 4.9 Mnt, (vs CEBPL est. 4.9 Mnt) up 4.7% YoY and 12.6% QoQ.
* Consolidated EBITDA for Q3FY25 was reported at INR4,921 Mn, (vs CEBPL est. INR4,628 Mn) was down 21.3% YoY and up 73.3% QoQ. EBITDA/t for Q3 came at INR1,000/t, was down 24.8% YoY and up 53.9% QoQ. EBITDA Margins for the quarter was 16.8% (vs CEBPL est. 16%), down 450bps YoY and up 570bps QoQ.
* PAT for Q3FY25 reported at INR1,896 Mn, (vs CEBPL est. INR1,610 Mn) was down 33.2% YoY and up 50.7% QoQ. EPS for Q3FY25 is INR24.6.
JKCE targets central market with aggressive expansion and premium push: JKCE is sharpening its focus on expanding in the central market, driven by improving cement demand and realizations in the region. With a growing presence in this key market, the company aims to boost the share of premium products from 16% to 20% in the coming months. The recent capacity expansion at the Panna plant, doubling from 3.3 MTPA to 6.6 MTPA, strengthens its ability to cater the market of UP, MP and Rajasthan. We expect JKCE achieving a volume of 21.6 MTPA in FY26, supported by robust regional demand and its aggressive expansion strategy.
Unlocking INR 150-200/t cost savings over the next 2 years: The management has reaffirmed its commitment to cost optimization, setting a target to reduce costs by INR 50/t by FY26. The company plans to increase the share of green power from 51% in FY24 to 60% by FY26, significantly lowering energy costs. Additionally, a focused effort to reduce the lead distance by ~10-15 km is expected to contribute savings of ~INR 40-45/t. These measures are part of a broader cost-reduction framework aimed at enhancing overall profitability. As a result, we expect the company will achieve an EBITDA/t of INR 1,283/t by the end of FY27, reinforcing its competitive edge in the market.
View & Valuation: We revise our FY26/27 EPS estimates by 0.6%/3.9% and upgrading our rating to ‘BUY’ with a revised TP of INR5,532, valuing it at 16x (revised because of improving cement outlook and management commentary on EBITDA/t improvement) on FY27 EV/EBITDA. The management is confident about cement volume growth, projecting a 10% increase in FY26. Additionally, the company has raised its FY26 capex guidance to INR 1,750 Mn to support the expansion of Saifco Cement. This strategic acquisition is expected to help the company penetrate new markets and strengthen its market presence.
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