Buy This Multibagger Cement Stock For Target Price Of Rs 3020, Reported Strong Quarter

Stock Outlook

The current market price of the company's stock is Rs 2,739.90 apiece. It is currently trading Rs 736.2 above the 52 week low level and Rs 1,098.1 below the 52 week high level, respectively.

The 52-week low of the stock record on 23 June 2022 is Rs 2003.70 apiece, and the 52-week high recorded on 08 November 2021 is Rs 3,838 apiece.

The ROE of the stock is 15.88%. It has a market capitalization of Rs 21,170.73 crore.

Returns on Investments

In the past 1 month, the stocks of the company surged nearly 3.67%, whereas, in the past 1 month, the shares surged 22.06%. In the past 3 months, the stocks surged 15.08%. However, over the past 1 year, the stocks have fallen 13.35%, giving a negative return. Over the 3 and 5 years, the stocks have given multibagger returns of 170.26% and 174.17%, respectively.

Integrated greenfield grey cement plant of 4 mntpa at Panna

The company is setting up an integrated greenfield grey cement plant of 4 mntpa at Panna, MP with a split grinding unit in UP at an estimated cost outlay of Rs 2,970 Cr. The expansion will constitute a 2 mntpa grinding unit, 8000 tpd clinkerization facility, 22 MW WHRS plant at the integrated site, and 2 mntpa grinding unit at Hamirpur, UP. Civil work is almost complete and over 50% of the equipment erection has been done. Expenditure as on date is funded by borrowing of Rs 841 Cr and Rs 1231Cr from internal accruals It is expected to be commissioned by Q3FY23.

Hamirpur split grinding unit project to support the central market

Execution work for the Hamirpur split grinding unit project commenced on Sep'21 and currently, work is progressing ahead of schedule and the 50% erection of equipment has been completed. This expansion will support the volume requirement of the central Indian region. The unit is expected to get operational by Q3FY23.

Additional grinding Unit

The company is also looking to set up two additional grinding units of 2 mtpa each in UP and MP as it will have additional clinker after the Panna expansion gets completed. The company has identified Central MP and East UP as preferred place for setting up new GU. The GU is expected to get commissioned in FY25. Apart from this, the company is also looking to de-bottleneck its existing plants to increase another 2 mtpa capacity by FY25.

Brokerage's Views

The company reported healthy volume and revenue growth during the quarter. Both Grey and White Cement realization improved by 11%/6%, contributing to higher revenue YoY. Its expansion plans are progressing well and with better demand and sustained pricing, we expect the growth momentum to continue.

The company's outlook continues to be robust in the backdrop of new capacity expansion in the high-growth market of Central India, better pricing, its endeavour to increase trade sales and higher blending ratio and cost optimization measures undertaken. The company's efforts are well-supported by higher government spending on infra, affordable, and rural housing, and robust demand in real estate and Individual home buyer market. However, the cost pressure is likely to sustain in Q2FY23 also and subside gradually moving ahead.

Buy for a target price of Rs 3,020

The stock is currently trading at 15x/12x FY23E/FY24E EV/EBITDA. We value JK Cement Limited at 13x FY24E EV/EBITDA to arrive at a Target Price of Rs 3,020 (Rs 2800 earlier) implying an upside of 14% from the Current Market Price and maintaining our BUY rating on the stock.

About - JK Cement Limited

JK Cement Ltd. is one of India's leading manufacturers of Grey Cement and one of the leading White Cement manufacturers in the World. Over four decades, the Company has partnered India's multi-sectoral infrastructure needs on the strength of its product excellence, customer orientation and technology leadership. JK Cement's operations commenced with commercial production at its flagship grey cement unit at Nimbahera, Rajasthan in May 1975.
The Company has an installed Grey Cement capacity of 15 MnTPA as on date, making it one of the top cement manufacturers in the Country. One of the leading manufacturers of White Cement, globally, with a total white cement capacity of 1.20 MnTPA and wall putty capacity of 1.2MnTPA. JK White Cement is sold across 43 countries around the globe and the Company has a strong international presence with two subsidies, JK Cement Works Fujairah FZC and JK White Cement (Africa) Ltd.