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Motilal Oswal Report
We estimate JK Cement Ltd. to deliver a compound annual growth rate of 11%/18% in consolidated revenue/Ebitda over FY24-27, driven by higher sales volume and cost savings. We estimate the company's consolidated volume to report a 12% CAGR over FY24-27 and estimate Ebitda/tonne of Rs 1,060/Rs 1,180/Rs 1,260 in FY25/FY26/FY27 versus Rs 1,080 in FY24 (average Rs 1,035 over FY19-23).
Profit after tax is estimated to clock a 25% CAGR over FY24-27, aided by an improvement in profitability.
We estimate JK Cement to generate a cumulative operating cash flow of Rs 70 billion over FY25-27E, and its cumulative capex would be Rs 52 billion over the same period.
Given the company's expansion plans, we believe its net debt will peak out in FY26 (net debt is estimated to rise to Rs 50 billion by FY26 from Rs 42 billion as of March 2024).
Further, we estimate its RoE/RoCE (post tax) to improve to 21%/15% in FY27 from 16%/ 11% in FY24, led by higher margins and a higher asset turnover ratio.
JK Cement trades at 14 times/11 times FY26E/FY27E EV/Ebitda.
Considering JK Cement's increasing scale of operation, better execution strategy and cost reduction initiatives, we value it at 15 times Sep'26E EV/Ebitda to arrive at our target price of Rs 5,600. We reiterate our Buy rating on the stock.
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