New Delhi, june 22, 2020.

Shares of JK Cement Ltd soared close to 11% on Friday, a day when the Nifty 50 index gained 1.5%. Analysts attribute this to the company’s solid March quarter results and a relatively better outlook despite the covid-19 outbreak.

Firstly, the company’s March quarter Ebitda of ₹346 crore was much better than the ₹290 crore that a Bloomberg poll of analysts had estimated. Ebitda is earnings before interest, taxes, depreciation and amortization. Analysts from Edelweiss Securities Ltd point out, “For Q4FY20, JK Cement turned in an all-time high Ebitda.”

True, volumes were lower during the quarter. Blended volumes declined by 7% year-on-year, owing to the covid-19-induced lockdown. Volumes of grey cement and white cement (including putty) declined by 6.6% and 13%, year-on-year, respectively. However, lower costs and better realisations saved the day for JK Cement at the profitability level. Reversal of dealer incentives to the tune of ₹20-25 crore also helped profitability last quarter.

JK Cement’s pre-tax and exceptional item earnings expanded by 22% over the same period last year to ₹258 crore. Going ahead, the company’s efforts to reduce fixed costs would augur well.

“We expect the company to benefit from the efficiency (lower coal and power consumption) of the new plants (3.5mt commissioned and 0.7mt to be commissioned in Q3FY21),” wrote analysts from Emkay Global Financial Services Ltd in a report on 18 June. The capacity expansion is expected to help the company gain market share and, of course, boost volumes. In the interim though, the lockdown in the initial parts of this quarter would obviously weigh on performance. Investors will watch for signs of visible recovery from the second half of this fiscal.