Buy JK Lakshmi Cement; target of Rs 520: JM Financial
JM Financial’s research report on JK Lakshmi Cement
For 2QFY18, JK Lakshmi reported volumes in line with our estimates at 1.89MnT, +10% YoY, primarily on higher capacity vs. the base quarter. Realisations rose 8% YoY (sequential growth of 3.5%) primarily on a change in the sales pattern from Ex works to FOR. EBITDA/t at INR 505/t declined 7.4% YoY as the rise in power/fuel and freight costs more than offset realisations growth. It commissioned 7.5MW of WHR at its Durg unit, benefits of which would be seen going forward (c.INR 50/t in east). In addition, management expects c.INR 200/t cost saving from 20MW captive thermal power plant (4QFY19 commissioning).
In the medium term, clinker capacity could be a bottleneck in east. We continue to value the stock at 9x EVE to arrive at a TP of INR 520 (Sep’18). Maintain BUY.
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