Kajaria Cements: Maintain ‘Buy’ with a target price of Rs 625

By: |
Published: January 23, 2019 12:12:41 AM

KJC reported impressive Q3 numbers – strong volume growth and firm margins q-o-q – despite a tough economic environment. The numbers were in-line with our estimates but demonstrated a significant beat over consensus.

Kajaria Cements: Maintain ‘Buy’ with a TP of Rs 625

KJC reported impressive Q3 numbers – strong volume growth and firm margins q-o-q – despite a tough economic environment. The numbers were in-line with our estimates but demonstrated a significant beat over consensus.

KJC reported a clinical performance with: (a) 16% y-o-y volume growth (I-Sec: 13%) largely aided by market share gains, (b) 90bps improvement in margins q-o-q at 15.9% (I-Sec: 15.8%) led by operating leverage and turnaround of its subsidiaries (tiles and bathware), and (c) strict working capital management (at 62 days up just 2 days q-o-q). KJC reported consolidated PAT at `648 m (I-Sec: `623 m), up 19% y-o-y/29% q-o-q aided by sound operating performance and lower interest cost.

Given in-line Q3 performance, we maintain revenue and earnings estimates and expect KJC to report revenue and PAT CAGRs of 13% and 19.2%, respectively, over FY18-FY21 largely driven by (a) sustained double digit volume growth over next two years aided by its growing competitiveness over unorganised as well as organised players; (b) expected energy savings led by recent sharp fall in crude prices which should drive its Ebitda margin higher to 17.5%/18% by FY20/FY21, respectively.
RoCEs are estimated to inch up to 30% by FY21 led by its stringent working capital management, leaner capex and increasing FCF. We maintain ‘Buy’ on the stock with a target price of `625, valuing it at 30xFY20E earnings.

KJC posted 14.7% y-o-y revenue growth at `7.59 bn (I-Sec: `7.5 bn) aided by 16% volume growth in tiles and 40.6% y-o-y growth in allied products. The growth was largely attributed to market share gains with industry expected to have grown flattish or at low single-digit during the quarter.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.