This midcap cement stock is the pick of the week, rises over 33% in 4 months

JK Cement shares closed on Monday’s Muhurta trading 2,677.10 each on the BSE, up 0.86%. of the company Market hat is around 20,680.95 crore.

On D-Street, JK cements had reached a 52-week low 2,005 each. From this level, the stock is up over 33.5% as of October 24. The stock had touched a 52-week high. 3,836.65 each on November 8 last year.

JK Cements is one of India’s leading manufacturers of Gray Cement and one of the leading White Cement Manufacturers in the world. Over four decades, the company has partnered with India’s multi-sectoral infrastructure needs through its product excellence, customer orientation and technology leadership.

Presently, the company has an installed gray cement capacity of 14.7 MTPA and white cement and wall putty capacity of 2.8 MTPA, making it one of the leading cement manufacturers in the country. It is the second largest producer of white cement in India.

JK Cements from Axis Securities is the pick of the week.

Axis Securities highlights three factors as investment rationale in JK Cements. These are:

1. Capacity Expansion to Promote Higher Sector Revenue Growth:

Presently, the company is expanding its gray cement capacity to 4 MTPA, which is expected to be commissioned in Q3 FY23, taking the total capacity to 18.7 MTPA.

With the advent of new capabilities, the company has an opportunity to gain further market share in the demanding central India market with a less volatile pricing trajectory.

In addition, it plans to increase its gray cement capacity by another 4 MTPA by setting up units in MP and UP.

“We expect a CAGR of 14% over FY 2011-24E which is much higher than the industry growth estimated at 8% CAGR in the same period,” Axis Sec said in its report.

2. High Government Focusing on Housing and Infrastructure to Increase Cement Consumption:

The stock brokerage expects the housing and infra sector to further accelerate cement demand as the central government for development under housing (urban and rural, low-cost housing), infra (rail, road, port, airport, ropeway) Very curious. Various programs and initiatives of the Central Government.

The housing and infra sector consumes about 80-90% of the total cement produced in the country.

That being said, the brokerage’s note said, “With General Elections 2024 fast approaching, rising construction activities will propel the demand for cement. We expect the overall cement demand in the country from FY 22 to 8-9.” Will grow at a CAGR of percentage. -FY25. Existing ones like JK Cements will benefit from rising demand for cement.”

3. Growth in White Cement Business:

As Axis Sec notes, the white cement and wall putty business contributes about 30% to the total revenue, with a high EBITDA margin of between 25-28%.

The note said, “We expect the white cement business to grow at a CAGR of 8% over the period FY 2011-24E. This will help improve blended realization from Rs 5700/tonne in FY 2011. 6050/ton in FY24E. We expect the overall EBITDA margin to increase to 19% from the current 17% in FY24E.”

Giving an outlook and valuations, Axis Sec’s note said, “With expanded efficiencies, increased demand for better pricing and cooling of commodity prices, we expect JKCL to grow by 14%/- respectively in FY 2011/-. Will report Revenue / EBITDA / APAT CAGR of 15% / 11%- FY24E. The stock is currently trading at 16x and 12x FY23E/FY24E EV/EBITDA.

Axis Securities has a buy call on JK Cement Shares with a target price of Rs. 2,920 each.

Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.