JK Cement share price that has risen 56 % in last one year and is trading near 52-week highs seen recently. Strong cement demand in the country has been driving investor confidence on cement stocks. The expansions being carried out by JK Cement have further helped improve sentiments.
Analysts remain positive and see more gains ahead. Those at Motilal Oswal Financial Services have given target price of ₹5050 indicating upside of more than 12%
3 Key reason which can drive more gains for JK Cement
Expansion driven volume growth
Analysts at Motilal Oswal Financial Services remain positive on JK Cement’s execution capabilities as the commissioning of its new plant at Panna, Madhya Pradesh achieved a 90% capacity utilization with one year of commissioning, helping the company deliver higher-than industry volume growth.
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Analysts at Axis Securities also had attributed Q3 volume growth to the recent expansion of 4 mtpa (million tonne per annum) grey cement capacity in the demand-accretive central India region.
More capacity expansions to drive growth
JK Cement has further plans to expand its capacities at Panna. JK Cement announced announced a clinker capacity expansion of (10,000 tonne per day or 3mtpa) at Panna and associated grinding units in the Central region and Bihar (cumulative capacity of about 6 million tonne per annum). Motilal Oswal said, JK Cement has potential to reach 50mtpa plus capacity in the long run, as it follows a disciplined expansion approach.
Analysts at Axis Securities also say that the company’s new capacity expansion program of 6 mtpa will take its total Grey Cement capacity to 30 mtpa from the current 22 mtpa (capacity growth of 13% CAGR over FY23-FY26). This is expected to drive the company’s volume growth moving ahead and Axis Securities expects the company to post volume growth of 13% CAGR over FY23-26.
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Earnings upgrades
Analysts are upgrading forward earning estimates with those at MOFSL having upgraded Earning before interest tax deprecation and amortisation estimates estimates by 6% and 7% for FY25 and FY26 post Q3.
Analysts at Axis Securities also expect the company to report an Ebitda margin in the range of 18%-20% and Ebitda per tonne of ₹1,100 Rs1,200 and ₹1240 in FY24 , FY25, and FY26 respectively, driven by higher volumes, improved realizations, and lower costs.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions
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Published: 28 Feb 2024, 05:13 PM IST