Net sales grew by 22% YoY (-3% QoQ) to INR8b (v/s est. of INR7.4b). Cement volumes grew by 21% to 1.74mt (v/s est. 1.53mt). Grey cement volume grew 22% YoY (+1% QoQ) at 1.54mt (v/s est. of 1.34mt) led by South volumes growing 39% and North growing 15%.

1. 28 July 2014
1QFY15 Results Update | Sector: Cement
J K Cement
Jinesh Gandhi (Jinesh@MotilalOswal.com); +91 22 3982 5416
Sandipan Pal (Sandipan.Pal@MotilalOswal.com); +91 22 3982 5436
BSE SENSEX S&P CNX
CMP: INR383 TP: INR520 Buy26,127 7,790
Bloomberg JKCE IN
Equity Shares (m) 69.9
M.Cap. (INR b) / (USD b) 26.8/0.4
52-Week Range (INR) 419/148
1, 6, 12 Rel. Per (%) -8/91/54
Financials & Valuations (INR m)
Y/E Mar 2014 2015E 2016E
Sales 37.7 45.5 53.3
EBITDA 6.0 9.2 12.3
Adj EPS 20.6 47.6 80.9
EPS Gr. 92.2 131.1 70.0
RoE (%) 7.9 16.7 23.8
RoCE (%) 9.0 14.0 18.5
Valuations
P/E (x) 18.6 8.1 4.7
P/BV (x) 1.5 1.3 1.0
EV/EBITDA 9.0 5.4 3.3
 Revenue beat on higher volumes, realizations disappoint: Net sales grew by 22%
YoY (-3% QoQ) to INR8b (v/s est. of INR7.4b). Cement volumes grew by 21% to
1.74mt (v/s est. 1.53mt). Grey cement volume grew 22% YoY (+1% QoQ) at 1.54mt
(v/s est. of 1.34mt) led by South volumes growing 39% and North growing 15%.
White cement (incl putty) volumes grew 12% YoY to 0.2mt (in-line). Blended
realizations at INR4,616/ton (v/s est. INR4,834) were down 3.4% QoQ. Grey
cement realizations declined 1.6% QoQ to INR3,844/ton (v/s est of INR3,949/ton),
as South realizations declined 4% and North realizations declined 1%. Further,
white cement realizations declined 3% QoQ INR10,685/ton (v/s est. of
INR10,942/ton), impacted by lower contribution of white cement.
 Lower realizations and weaker mix impacts profitability: EBITDA was ~INR985m
(+8% YoY, -38% QoQ) v/s estimate of INR1.05b. Blended EBITDA/ton at
~INR567/ton (v/s est. ~INR687) was impacted by lower realizations, weaker mix
(lower white cement contribution) and higher cost (pet-coke price inflation and
maintenance cost). Grey cement EBITDA/ton was at ~INR327/ton (-INR333/ton
QoQ). Lower depreciation and lower tax boosted PAT to ~INR380m (v/s est.
~INR299m), a growth of 23% YoY.
 Brownfield expansion at Rajasthan commenced operations: 3mt brownfield
capacity addition at Rajasthan is now ready, with commissioning of clinker
production in 1QFY15 and cement production to start from August 2014. Further,
UAE plant is fully functional with sales of ~35,000t of till June mainly in GCC region
and East Africa. Sales are likely to pick up from October onwards after the end of
lean period till September and registration of its product in various countries.
 Revised estimates, Maintain Buy: We are revising our EPS estimates for
FY15E/16E by -9%/+5% to factor for a) strong volume growth, b) weaker
realizations, c) lower depreciation and d) lower tax. The stock trades at 8.1xFY16
EPS, 5.4x EV/EBITDA and USD71/ton (blended). Maintain Buy with a target price of
INR520 (USD56/ton for Grey cement capacity and 10x FY16E White cement EPS).
Investors are advised to refer through disclosures made at the end of the Research Report.

2. 28 July 2014 2
J K Cement
Grey Cement volumes grew 22%...
1.3 1.2 1.2 1.6 1.5 1.4 1.3 1.5 1.3 1.3 1.3 1.5 1.5
3.5
2.5
4.5 5.7
13.2
17.8
1.9
-5.5
-15.5
-7.4
4.9
-0.5
22.1
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
Grey Volume (mt) Growth(%)
Source: Company, MOSL
White cement posted steady growth
0.12 0.12
0.13
0.15 0.15 0.16 0.19 0.19 0.17 0.20 0.21 0.21 0.20
26.3
18.8
5.6
16.9
20.8
30.3
42.5
24.7
19.0
22.6
12.2 13.2 11.9
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
White volume (mt) Growth(%)
Source: Company, MOSL
South witnessed very sharp recovery in 1QFY15…
-40
-20
0
20
40
0.0
0.2
0.4
0.6
1QFY14 2QFY14 3QFY14 4QFY14 1QFY15
SouthVols (mt) Growth(%) - RHS
Source: Company, MOSL
…while North also witnessed good recovery
-10
0
10
20
0.6
0.8
1.0
1.2
1QFY14 2QFY14 3QFY14 4QFY14 1QFY15
NorthVols (mt) Growth(%) - RHS
Source: Company, MOSL
Contribution from white cement business declining…
20
25
22
25
21
24
31
27
29
33
34
28
26
80
75
78
75
79
76
69
73
71
67
66
72
74
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
White Grey
Source: Company, MOSL
… impacting blended realizations
3,819
3,399
3,621
4,024
4,203
3,986
4,495
4,566
4,486
4,666
4,743
4,485
4,571
4,269
4,399
4,778
4,616
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
BlendedRealizations (INR/ton)
Source: Company, MOSL

3. 28 July 2014 3
J K Cement
Grey cement realization declines QoQ…
3,682
3,321
3,879
3,742
3,914
3,971
3,782
3,670
3,702
3,301
3,397
3,909
3,844
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
GreyRealizations
Source: Company, MOSL
…as realizations in both North & South were under pressure
3,654
3,740
3,602
3,480
3,470
3,191
3,258
3,868
3,836
4,418
4,424
4,211
4,100
4,279
3,567
3,793
4,030
3,861
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
NorthRealn(INR/Ton) SouthRealn(INR/Ton)
Source: Company, MOSL
Blended EBITDA/ton declines QoQ/YoY…
893
470
874
1,129
954
848
923
772
636
260
477
913
567
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
BlendedEBITDA/Ton
Source: Company, MOSL
…as grey cement EBITDA/ton under pressure
768
217
679
900
796
644
632
479
373
-48
134
660
327
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
GreyEBITDA/ton
Source: Company, MOSL
Key performance indicators (blended)
INR/Ton 1QFY15 1QFY14 YoY (%) 4QFY14 QoQ (%)
Net realization 4,616 4,571 1.0 4,778 (3.4)
RM Cost 754 494 52.5 736 2.3
Employee Expenses 278 319 -12.7 232 20.1
Power, Oil & Fuel 1,119 1,179 -5.1 1,126 -0.7
Freight 1,022 1,007 1.5 1,027 -0.4
Other Expenses 876 936 -6.4 744 17.7
Total Exp 4,049 3,935 2.9 3,865 4.7
EBITDA 567 636 -10.8 913 -37.8
Source: Company, MOSL
Revised forecast
(INR M) FY15E FY16E
Rev Old Chg (%) Rev Old Chg (%)
Net Sales 37,654 36,774 2.4 45,509 44,087 3.2
EBITDA 5,958 6,471 -7.9 9,154 9,312 -1.7
Net Profit 1,440 1,583 -9.0 3,328 3,167 5.1
EPS (INR) 20.6 22.6 -9.0 47.6 45.3 5.1
Source: MOSL

4. 28 July 2014 4
J K Cement
JKCE: Sum of the parts valuation
EV/EBITDA FY16E
Grey Cement 7 35,474
White Cement 6 18,068
UAE White Cement 5 5,585
EV (INR m) 59,127
Consol Net debt (INR m) 22,752
Equity value (INR m) 36,375
Equity value (INR/Shr) 520
Implied EV/Ton (blended) 84
Implied EV/Ton (Grey) 56
Implied PE (White) 10.2
Source: MOSL

5. 28 July 2014 5
J K Cement
J K Cement: an investment profile
Company description
JKCE is one of India's leading cement producers, with
7.5mtpa of gray cement capacity -4.5mtpa in the North
(Rajasthan) and 3mtpa in the South (Karnataka). It is the
second largest white cement manufacturer in India,
with a capacity of 0.4mtpa (0.6mtpa by FY14). Its
ongoing 3mtpa split grinding expansion in the North
would take its gray cement capacity to 10.5mtpa by
FY15. JKCE is also expanding its international footprint
through a 0.6mtpa Greenfield white cement plant in
UAE to address rising international demand.
Key investment argument
 JKCE has a favorable market mix, with North and
West India accounting for ~70% of dispatches. It has
no exposure to the underperforming Andhra
Pradesh market.
 Its North India plants are operating at over 90%
capacity and ongoing brownfield capacity expansion
is likely to contribute from 2QFY15, would aid
volume growth.
 Company's White cement business is a cash cow.
The stable operating income of INR2-2.5b per year
from White cement would render meaningful
cushion to its debt servicing during the capex cycle.
Recent development
 Commenced clinker production at greenfield
expansion at Rajasthan, with cement production
expected to start from August 2014.
Valuation and view
 We are revising our EPS estimates for FY15E/16E by -
9%/+5% to factor for a) strong volume growth, b)
weaker realizations, c) lower depreciation and d)
lower tax.
 The stock trades at 8.1xFY16 EPS, 5.4x EV/EBITDA
and USD71/ton (blended).
 Maintain Buy with a target price of INR520
(USD56/ton for Grey cement capacity and 10x FY16E
White cement EPS).
Sector view
 Post weak pricing environment during monsoon,
cement prices and demand are expected to pick-up
post monsoon.
 Structural increase in cost base (both capex and
opex) would necessitate higher cement prices.
 Revival in cement demand would be key catalyst for
the stock performance.
Comparative valuations
JKCE JKLC PRSC
P/E (x) FY15E 18.6 15.0 -21.2
FY16E 8.1 10.1 171.5
P/BV (x) FY15E 1.5 3.3 3.5
FY16E 1.3 2.5 3.4
EV/Ton ($) FY15E 77 106 143
FY16E 71 101 126
EV/EBITDA (x) FY15E 9.0 8.5 44.2
FY16E 5.4 6.4 12.3
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
Consensus
Forecast
Variation
(%)
FY15 20.6 17.9 15.4
FY16 47.6 33.5 42.0
Target price and recommendation
Current
Price (INR)
Target
Price (INR)
Upside
(%)
Reco
383 520 35.8 Buy
Shareholding pattern (%)
Mar-14 Dec-13 Mar-13
Promoter 66.9 66.9 66.7
Domestic Inst 9.6 9.8 10.1
Foreign 12.4 12.1 10.9
Others 11.1 11.1 12.3
Notes: FII includes depository receipts
Stock performance (1-year)

6. 28 July 2014 6
J K Cement
Financials and valuations

7. 28 July 2014 7
J K Cement
N O T E S

8. 28 July 2014 8
J K Cement
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Disclosure of Interest Statement JK Cement
 Analyst ownership of the stock No
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