Buy This Cement Major For A Target Price Of Rs 3020, As Recommended By Axis Securities

Leading brokerage firm Axis Securities in its latest annual analysis has recommended investors to buy the stock of cement major JK Cement Ltd for a target price of Rs 3020 apiece. In FY22, JK Cement registered a cement sales volume of 14.04 million tones per annum (mtpa), up 16% YoY from 12.04 mtpa in FY21. Grey and White Cement volume grew by 9% and 8% respectively.

The growth was driven by a superior demand environment in both trade as well as non-trade segments.

JK Cement Stock Outlook

The current market price of the stock is Rs 2658 apiece. If you invest in the stock now it has the potential to surge to Rs 3020 apiece, according to Axis Securities. It will offer a potential gain of 14%.

JK Cement 52-week high/low and return in 5 years

The stock's 52-week high is Rs 3836 apiece and 52-week low is Rs 2005 apiece. The stock has given a return of 162% in 5 years, 168% in 3 years, and fallen 13% in 1 year.

JK Cement foray into the paints business

The company has forayed into the Paints business with an initial investment of Rs 600 Cr. It intends to focus on its key UP and Rajasthan markets, where it has a strong footing in the cement business. The company aims to leverage its White Cement and Wall Putty dealers network to grow the Paint business.

JK Cement Brownfield modernisation of Nimbahera Line-3

JK Cement completed the brownfield modernisation of Nimbahera Line-3 with the kiln and the line is now capable of producing 6,500 tonnes per day (TPD) against the earlier capacity of 5,000 TPD. Moreover, its earlier brownfield capacity has been delivering higher efficiencies in terms of reduced power/fuel consumption and increased WHR.

JK Cement key competitive strengths

It includes: a) Capacity to produce both Grey and White cement as well as Wall Putty, enabling it to capture changing customer preferences better than its peers; b) Robust Sales & Distribution network facilitating extensive customer reach; c) Robust financial position; d) Experienced and competent management bandwidth and e) Improving traction in the Premium and Value-added products, aiding in the company's margin profile.

JK Cement Strategies

It includes: a) Strengthened market reach through capacity building; b) Improved efficiency through technological upgradation, process optimization, and productivity enhancements; c) Diversified revenue stream further by launching new products as per prevailing market needs, and d) Broad-based ESG commitments to enhance operating sustainability. These initiatives have enabled the company to record higher volume and revenue growth during an otherwise challenging year marred by the COVID 2.0 and elevated cost trajectory.

JK Cement Growth Drivers

It includes: a) Rural Housing; b) Affordable Housing; c) The government's keen focus on infrastructure development including roads, railways, highways, metros, airports, irrigation, and water projects; d) Real estate growth; e) Urban infrastructure development such as Smart Cities and AMRUT Yojana.

JK Cement Valuation

According to Axis Securities, "We expect the company to deliver Volume/Revenue/EBITDA/APAT growth of 11%/15%/17%/15% CAGR over FY22-24E. This will be led by higher cement demand in its operating regions, upcoming capacity, deeper market reach, richer product mix supporting higher realizations, the introduction of margin accretive value-added products, and efficiency gains. The stock is currently trading at 15x and 12x FY23E and FY24E EV/EBITDA. We value JKCL at 13x FY24E EV/EBITDA and assign a BUY rating to the company with a TP of Rs 3,020/share, implying an upside potential of 13% from the CMP."

About JK Cement

JK Cements Limited (JKCL) - a dominant player in the cement industry in the markets of North, Central, and South India, has over four decades of experience in cement manufacturing.

Its operations commenced in May'75 with commercial production at its first Grey Cement plant at Nimbahera (Rajasthan) followed by capacity expansion in its key markets. Today, it has an installed Grey Cement capacity of 14.7 MTPA and White Cement and a Wall Putty capacity of 2.8 MTPA, making it one of the largest cement manufacturers in the country.

Disclaimer

The above stock was picked from the brokerage report of Axis Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.