Results Review for JK Cement, The Ramco Cements, Nuvoco Vistas, Heidelberg Cement


JK Lakshmi Cement Ltd (NS:): We maintain our REDUCE rating on JK Cement (JKCE), with a lower TP of INR 2,485 (11.5x Mar-23E consolidated EBITDA). In Q4FY22, while grey cement volume picked up QoQ, white/putty volume declined. Overall margin contracted in both the segments on rising energy costs. White profitability is additionally hit and continues to slide at a faster pace on increased competition (from paint companies). Consolidated revenue rose 10% YoY on higher grey NSR. However, EBITDA/APAT fell 21% each YoY.

The Ramco Cements (NS:): We maintain ADD on The Ramco Cements (TRCL), with a revised target price of INR 745/share (13x Mar-24E EBITDA). We continue to like the company for its strong retail presence in the south and growth-oriented strategy. TRCL delivered flattish volume YoY but was surprised with healthy realisation, +4% QoQ, leading to a 5% EBITDA beat (on our estimate). While standalone revenue rose 5% YoY, higher input cost, other expenses, and capital charges pulled down EBITDA/APAT by 34/42% YoY. Net debt/EBITDA increased to 2.9x in Mar-22 on account of expansion-led debt pile-up.

Nuvoco Vistas Corporation Ltd (NS:): We maintain BUY on Nuvoco Vistas, with an unchanged TP of INR 620/share (11x its consolidated Mar-24E EBITDA). We continue to like it for its leadership presence in the east, large retail focus, and various margin initiatives. Nuvoco is also working to reduce leverage on its books (Mar-22 net debt/EBITDA at 3.5x, vs 4.7x YoY). In Q4FY22, Nuvoco delivered a healthy volume recovery (+30% QoQ) on-demand uptick. Even unitary EBITDA rebounded 43% QoQ to INR 792/MT on healthy pricing and stable input costs. On a YoY basis, while consolidated revenue went up 11%, the input cost spike pulled down EBITDA/APAT by 19/22% YoY. The company tightened its working capital, which had bloated in Sep-21, further boosting its debt reduction efforts.

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HeidelbergCement (ETR:) India Ltd (NS:): We maintain our REDUCE rating on Heidelberg Cement (HEIM), with a revised target price of INR 190/share (8.5x Mar-24E EBITDA). In the absence of any major planned expansion for the next three years, we expect subdued volume growth and loss in market share, as other players expand in HEIM’s core markets. In Q4FY22, the company’s QoQ volume recovery in the peak quarter remained muted at 9% (-1% YoY). Adjusted for prior-period incentives, unitary EBITDA recovered 24% QoQ to INR 751/MT. Since there was no major Capex outgo, the balance sheet continues to be firm: net cash on the books almost doubled YoY in Mar-22 to INR 1.5bn.

Karur Vysya Bank (NS:): Karur Vysya Bank (KVB) reported a significant beat on our estimates, led by better NIMs and lower credit cost (1.1% annualised). Asset quality improved, with GNPA at ~6%, led by negative net slippages, while the restructured pool remained largely steady at ~2.8% of loans. Overall loan growth (+9% YoY) was driven by commercial (+12%), agri (+13%), and home loans (+9%). KVB is incrementally focused on driving granular growth (LAP, commercial banking, and other retail) and has guided for a 12% loan growth in FY23. With a steady NIM trajectory and improving line of sight on lower credit costs, KVB is well-placed to inch closer to its ~1% RoA target. We trim our FY23/FY24E earnings estimates by 1%/3% to factor in lower loan growth, partly offset by lower credit costs. Maintain ADD with a revised TP of INR63.

JK Cement

Margin dips QoQ in both segments

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We maintain our REDUCE rating on JK Cement (JKCE), with a lower TP of INR 2,485 (11.5x Mar-23E consolidated EBITDA). In Q4FY22, while grey cement volume picked up QoQ, white/putty volume declined. Overall margin contracted in both the segments on rising energy costs. White profitability is additionally hit and continues to slide at a faster pace on increased competition (from paint companies). Consolidated revenue rose 10% YoY on higher grey NSR. However, EBITDA/APAT fell 21% each YoY.

Q4FY22 performance: Grey cement volume/NSR rebounded 23/2% QoQ. However, opex rose at a faster pace of 4% on rising fuel inflation, pulling down unitary EBITDA by ~10% QoQ to ~INR 800/MT (our estimate). On a YoY basis, unitary EBITDA fell ~18% on a sharp fuel price rise. Consolidated white/putty volume fell 8% QoQ (flat YoY). Segmental EBITDAM contracted ~1/8pp QoQ/YoY to ~18% (owing to heightened competition in the putty segment). Blended unitary EBITDA fell 21/11% YoY/QoQ to INR 953/MT on a reduction in white/putty volume in sales mix and elevated opex.

Capex update and outlook: JKCE’s central expansion is progressing well. It has spent INR 15.4bn so far (50% of the project cost). And it expects to complete it by the end-FY23, leading to a grey cement capacity of 19mn MT. JKCE guided for consolidated Capex of ~INR 17/11bn for FY23/24E. We reduce our consolidated FY23/24E EBITDA estimates by 5% each, factoring in elevated energy costs. In FY22, consolidated EBITDA fell 4% YoY, which in our view is led by the ~25% fall in white/putty EBITDA, while grey EBITDA has gone up ~5% YoY. During FY22-24E, we estimate both segments would deliver ~15% EBITDA CAGR.

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