Hold JK Lakshmi Cement; target of Rs 373: Prabhudas Lilladher
Prabhudas Lilladher’s research report on JK Lakshmi Cement
JK Lakshmi Cement (JKLC) reported Q4FY19 earnings marginally above our estimates due to higher than expected volume growth offset by high raw material costs. Volume grew sharply by 32% YoY in Q4FY19 on the back of low base (volume de-grew by 2.5% YoY in Q4FY18). The price outlook in its key markets (North and East) remained firm driven by recent price hike however continuous capacity addition, intense competition and revival of capacities under distress would put pressure on prices going forward. To factor the increased prices and volume, we upgraded our EBITDA estimates by 0.8%/5% for FY20e/FY21e.
We expect margins to remain under pressure with EBITDA/t at Rs485 in FY20e despite cost savings from investments made on CPP, WHR and 0.8mtpa grinding unit in Odisha. Stock has rallied ~13%+ in the past two months and we expect limited upside from current valuations. Hence, we maintain Hold with TP of Rs373 (earlier Rs320), EV/EBITDA of 9.5x FY21e.
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