INSUBCONTINENT EXCLUSIVE:
ICICI Securities has a buy call on JK Lakshmi Cement with a target price of Rs 340.
The current market price of JK Lakshmi Cement is Rs
288.30.
Time period given by the brokerage is one year when JK Lakshmi Cement price can reach the defined target.
Investment rationale by
the brokerage:We believe JK Lakshmi Cement (JKLC) is likely to outperform its mid-cap peers given that:
(a) its cost structure is expected
to improve with the commissioning of captive power plant at Durg and additional grinding unit at Odisha by Q4FY19E and an overall reduction
in lead distance, coupled with the recent 10-15 per cent decline in various input costs such as petcoke, diesel, etc
and implementation of new axle load norms;
(b) its consolidated net debt of Rs 2,100 crore is expected to decline >30 per cent by FY21E as
no major expansion is planned for next 12-18 months, and
(c) it enjoys better market mix operating with high utilisations (ex-South
Chhattisgarh vs the nearly flat to a marginal decline in prices in other regions
Valuation at 8xFY20E EV/E, or EV/te of US$60/te, remains attractive
