JK Cement Ltd. share price target

we assign a BUY rating to the company, with a Target Price (TP) of Rs 3,560/share, suggesting a potential upside of 12% from the current market price (CMP).

JK Cement’s (JKCE) Q1FY24 performance stood strong, being one of the few cement companies to report a QoQ margin improvement of ~170bps (EBITDA stood 15% ahead of estimates). We see scope for further margin improvement owing to near-term benefits of a) incentives from the new Panna unit (in Madhya Pradesh)

Recommendation: We maintain our BUY recommendation on the stock.

Volume growth healthy including contribution from the new Panna unit that has attained 60% capacity utilisation

JK Cement’s (JKCE) Q4FY23 performance was impressive on multiple counts: a) grey cement volumes surged 17% YoY (similar to FY23); b) grey cement realisations rose 1.6% QoQ (~3% QoQ for the standalone entity) defying the industry trend of a marginal decline.

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