J K Cements reported a strong set of numbers for the quarter, significantly ahead of estimates on all fronts. The revenue for the company was up by 28% yoy to Rs1,316cr, ~7% ahead of estimates. However, on account of substantial rise in all cost items, the EBITDA was down by 4.6% yoy to Rs181.9cr (but ~15% ahead of the estimates). EBITDA margin contracted by 473bps yoy to 13.8%. Lower interest cost and tax outgo aided the PAT to report 126.5% yoy growth to Rs96.5cr.
Company reported 27.3% yoy increase in grey cement volume to 2.4MT (on a low base of Q4FY17) and 10.7% yoy growth in white cement sales volume to 0.32MT.
On account of higher pet coke and diesel prices, the power and freight costs/tn were up by 23.3% and 24.5% yoy respectively to Rs1,180/tn and 1,368/tn.
EBITDA/tn (blended), thus, declined by 25.3% yoy to Rs758/tn.
Interest cost was down by 19.8% yoy to Rs56.2cr.
Tax rate for the quarter stood at 20.1% (Rs26.5cr) against 59.1% (Rs74.6cr) in Q4FY17.
Company has recommended a dividend of Rs10 per equity share for FY18.
Company announced that it will raise fund by issue of secured/redeemable non-convertible debentures in one of more series/tranches on private placement basis for an amount upto Rs500cr during FY19.
Savings from the usage of alternative fuel was Rs6-7cr in FY18, which is expected to increase to Rs15-20cr in FY19E.
Growth and capex plans:
The management indicated a volume growth expectation of 6-7% yoy in FY19E, primarily driven by 9-10% growth in North India.
The total market size of White Cement in India stands at 1.2mt. Company’s utilization rate for white cement stood at 85-90%. And, limestone reserves for white cement for the company is available for 30 years. Company expects the segment’s margin to remain similar going forward.
The UAE plant is operating at 50% capacity utilization. The company is trying to improve profit from this plant through: a) higher volume in African markets where prices are higher, b) imports in the South region in India and c) limestone mining through own mines in UAE, which would help reduce costs.
Lead distance in Grey Cement was 450km.
Company incurred a total capex of Rs110cr in FY18. Most of the capex out of ~Rs30cr for the expansion of putty capacity at Katni plan has been incurred in FY18; the expansion is expected to be completed in June’18. Going forward, compay will incur a capex of Rs150cr/year.
For the next phase of expansion, company is expanding its capacity of grey cement by 4MT (currently 11.1MTPA) to be operational by March FY20E, with a capex of Rs2,000cr (Rs700cr in FY19E and Rs1,300cr in FY20E). This capex would be funded through a debt of Rs1,300cr.
The expansion would include (a) 7,500 tonnes per day clinker unit and a 1 MTPA grinding unit at Mangrol, (b) 1MTPA GU at Nimbahera, (c) 1.5MTPA GU near Aligarh, Western UP and (d) 0.7MTPA GU in Silvassa, Gujarat.
Further, company is exploring options to acquire land in Madhya Pradesh and is also looking to obtain environmental clearance. Post this, it may consider setting up a plant in MP also.
J K Cements Ltd ended at Rs. 1,009.95, up by 4 points or 0.4% from its previous closing of Rs. 1,005.95 on the BSE.
The scrip opened at Rs. 994.95 and touched a high and low of Rs. 1,011.85 and Rs. 994.95 respectively. A total of 50,688 (NSE+BSE) shares were traded on the counter. The stock traded below its 200 DMA.
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