There are some near-term challenges facing the sector such as rising input cost inflation and demand uncertainty due to the second wave of coronavirus pandemic. Investors need to watch out for these
MUMBAI: The March quarter earnings of JK Lakshmi Cement Ltd exceeded analysts' expectations on multiple fronts. Reacting to the solid earnings, shares of the company hit a new 52-week high of Rs499 apiece on the National Stock Exchange in opening deals on Friday.
Cement sales volume rose 18% year-on-year (y-o-y) to 2.9 million tonnes, ahead of estimates of 2.5-2.8 million tonne. But the highlight of the quarter was the operating performance which was significantly better than estimates. Ebitda increased by around 33% y-o-y to a record high of Rs267 crore, beating consensus estimates of Rs195 crore aided by sequentially lower operating costs. Ebitda is short for earnings before interest tax depreciation and amortisation. Further, average realisation stood Rs4,225/tonne ahead of the estimated Rs4,100/tonne.
Apart from these, the company also pared debt. Gross debt declined Rs346 crore, while net debt was down Rs620 in FY21. Consequently, key gearing metric the net debt/Ebitda improved from 1.5 times in FY20 to to 0.5times in FY21.
The stock is trading at a one-year forward EV/Ebitda 5.5 times, shows Bloomberg data. EV is short for enterprise value. Analysts say this strong earnings performance bodes well for the stock's valuations.
"Overall performance was quite encouraging. It reported Ebitda at Rs790 crore for FY21, which is significantly higher than ours’ and Street’s estimate and therefore earnings upgrade is very much on the cards," said Binod Modi, head of strategy at Reliance Securities Ltd.
That said, there are some near-term challenges facing the sector such as rising input cost inflation and demand uncertainty due to the second wave of coronavirus pandemic. Investors need to watch out for these.