Buy

Pick of the Week JK Lakshmi Cement Ltd Target Price

22nd June, 2024 Cement 915

About the Company

Duration: 6-9 Months JK Lakshmi Cement (JKLC) is a dominant player in the cement industry, particularly in its key markets of North and West India,
from which it derives 75% of its revenue. The company also has a significant market presence in Eastern India. On a
consolidated basis, JKLC's total cement capacity stands at over 16 million tonnes per annum (mtpa).
Potential
CMP Target
Upside Investment Rationale
(Rs) (Rs)
(%)
A. Capacity expansion to drive higher revenue growth: The setting up of a grinding unit in Surat with a capacity of 1.35 mtpa at a
830 915 10% capital cost of Rs 220 Cr, funded through a mix of internal accruals and debt, is progressing well. The facility is expected to
commence operations in phases between FY25 and FY26. Additionally, the company's capacity expansion plan of 4.6 mtpa Cement
Grinding and 2.3 mtpa Clinker, at a capital cost of Rs 2,500 Cr (USD 65/tonne), will be commissioned in phases over FY26-27. These
MARKET DATA
expansions are anticipated to boost JK Lakshmi Cement's market share and revenue growth moving forward. We expect the
company to grow its revenue at a CAGR of 9% over FY24-26E.
No. of Shares 11.8 Cr
B. Higher EBITDA/tonne: During Q4FY24, the company reported an EBITDA/tonne of Rs 1,080, the highest in recent times, due to
Market Cap 9794 Cr various initiatives undertaken. The company expects to build on these initiatives, which include optimizing geo-mix, achieving higher
production and sale of blended cement, increasing the proportion of trade sales, premium and value-added products, enhancing
logistic efficiency, and utilizing more renewable power. We anticipate the company to grow EBITDA/tonne at a CAGR of 18% over
52-week High / Low 1000/607
FY23-26E, reaching Rs 1,100/tonne. This growth will be driven by stable realization, higher volume, and cost-saving initiatives.

BSE Code 500380 C. Cement demand to sustain: Cement demand in the country is expected to remain robust, driven by higher capital spending by the
central government on roads, railways, and housing, as well as strong real estate demand. Increasing investment in developing the
country's infrastructure will act as a catalyst for higher cement demand. The industry is expected to grow at a CAGR of 8-9% during
NSE Code JKLAKSHMI
FY23-FY26E.
D. Outlook & Valuation: The company’s topline and margins are expected to enhance on account of its superior positioning in the key
Why JK Lakshmi Cement Ltd markets of North, West, and East India along with its various initiatives such as its focus on increasing sales of premium and value-
added products, higher blending ratio and trade sales, more use of green energy and direct dispatches. We expect JKLC to report
 Capacity expansion to drive Revenue/EBITDA/APAT CAGR of 9%/22%/23% respectively over FY23-FY26E. The stock is currently trading at 10x and 8x
FY25E/FY26E EV/EBITDA, which we believe is attractive.
revenue growth.
E. Recommendation: We recommend a BUY the stock for a target price of Rs 915/ implying an upside of 10% from CMP
 Cost optimization to drive EBITDA
Financial Summary (Standalone)
margin.
Y/E Net Sales EBITDA Net Profit EPS PER EV/EBIDTA P/BV RoE
 Robust Cement demand March (Rs Cr) (Rs Cr) (Rs Cr) (Rs) (x) (x) (x) (%)
 Attractive valuation FY24 6,320 864 433 37 23 12 3.0 15
FY25E 6,695 1,048 532 45 29 10 2.8 16
FY26E 7,487 1,291 658 56 15 8 2.4 17
Source: Axis Securities. CMP as on 21st June, 2024
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CHADAWAR

CHADAWAR Date: 2024.06.21 16:36:02

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