JK Cement Ltd. share price target

Recommendation: We maintain our BUY recommendation on the stock and roll over our estimates to FY25.

Pricing power is crucial in the commodity business and the Indian cement sector is certainly losing the plot on that front. Elevated competitive intensity across regions, has prevented margin-accretive price hikes, despite: a) robust demand (Q4FY23E prices slipped ~1% QoQ notwithstanding peak season volume surge of ~10% YoY)

Grey cement volumes grew 23% YoY in Q3 backed by capacity addition in Central India and presence in remunerative areas guarding prices

Recommendation: We maintain our BUY recommendation on the stock and revise our estimates for FY23 and FY24 impacted by higher cost.

JK Cement’s (JKCE) Q3FY23 EBITDA at Rs2.6bn (down 29% YoY) was below our / consensus estimates. Blended realisation dipped ~1% (YoY and QoQ), while total cost/te rose 9% YoY (2% QoQ). This led to decline in blended EBITDA/te by 40% YoY (18% QoQ) to Rs669/te (I-Sec: Rs896/te).

We maintain our BUY rating on the stock and value it at 13x FY24E EV/EBITDA to arrive at a target price of Rs 3,350/share (unchanged), implying an upside of 14% from the current levels.

The stock is currently trading at 17x/12x FY23E/FY24EEV/EBITDA. We value JKCL at 13x FY24E EV/EBITDA to arrive at a TP of Rs 3,350/share (Rs 3,020/share earlier), implying an upside of 14% from the CMP and maintaining our BUY rating on the stock.