Accumulate JK Lakshmi Cement; target of Rs 447: Geojit Financial Services

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Geojit Financial Services' research report on JK Lakshmi Cement

JKLC reported a strong revenue growth of 25% YoY led by both volume (15%YoY) and realisation (8%YoY) growth. The change in billing method from ex-factory to FoR basis post GST supported realisation while volume growth was supported by ramp up of recently commissioned capacities. The cement price cap set by the state government in Chhattisgarh (60% of total sales in East) was removed and will support realisation in East in the coming quarters. Management expects the demand will be good in the coming two quarters (pre-monsoon).

Outlook

We expect demand to pick up in the coming quarters (pre-monsoon) which coupled with the ramp up in recently commissioned capacities bodes well for JKLC. The margins will have an impact due to recent surge in fuel cost. We value JKLC at EV/EBITDA of 12x on FY19E for standalone and 10x for UCWL and arrive at a target price of Rs 447 with Accumulate rating.

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