JK Lakshmi reported 4% growth in volumes despite a slowdown due to demonetisation. Earnings were ahead of our estimate aided by good volumes and lower other expenses and after sharp increase in fuel costs (due to pet-coke cost increase).
The company is set to commission 2.5 mtpa capacity by March 2017 and further 0.6 mtpa in FY2018E. We maintain our positive view on stock on earnings growth led by expanded capacity base, end of large capex cycle and balance sheet deleveraging.
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Maintain ‘add’ with revised a TP of R460 (R440 earlier).JK Lakshmi reported 4% y-o-y growth in volumes at 1.8 million tons led by stabilization of Durg Plant in the east. This was despite the slowdown in industry volumes due to demonetization, the impact of which was more severe in northern markets. The company’s Q3FY17 earnings were ahead of our estimates and revenues increased by 3% y-o-y to R6.7 billion (2% q-o-q, KIE: R6 billion), EBITDA by 24% y-o-y to R826 million (-12% q-o-q, KIE R579 million). The company reported net income of R76 million (KIE: -R97 million) against a loss of R37 million in Q3FY16.
Realisations declined by 3% q-o-q to R3,665/tonne given the decline in cement prices across India since October 2016. The costs were flat q-o-q despite sharp increase in fuel costs—it increased by 23% q-o-q (per tonne basis) due to higher pet-coke prices. Earnings would have been weaker due to increase in fuel costs but for the decline in other expenses by 13% q-o-q.