JK Cement’s share price, which has risen 56% in the last year and is trading near 52-week highs seen recently. Strong cement demand in the country has driven investor confidence in cement stocks. The expansions undertaken by JK Cement further helped improve sentiments.
Analysts remain positive and see more gains ahead. Those at Motilal Oswal Financial Services have given a target price of ₹5050 indicating an improvement of more than 12%
3 Key reason that can drive more earnings for JK Cement
Expansion caused 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 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 attributed Q3 volume growth to the recent expansion of 4 mtpa (million tonnes per annum) gray cement capacity in the demand-boosting 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 tonnes per day or 3mtpa) at Panna and associated grinding units in the Central region and Bihar (cumulative capacity of approximately 6 million tonnes per annum). Motilal Oswal said JK Cement has the potential to reach 50mtpa plus capacity in the long term as it follows a disciplined expansion approach.
Analysts at Axis Securities also say the company’s new capacity expansion program of 6 mtpa will take its total Gray 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 and Axis Securities expects the company to post a volume growth of 13% CAGR during FY23-26.
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Revenue updates
Analysts are upgrading previous earnings estimates with those at MOFSL, which have upgraded the Earnings before interest tax depreciation and amortization estimates by 6% and 7% for FY25 and FY26 after Q3.
Analysts at Axis Securities also expect the company to report an Ebitda margin in the range of 18%-20% and Ebitda per tonne ₹1,100 Rs1,200 and ₹1240 in FY24, FY25, and FY26 respectively, driven by higher volumes, improved realizations and lower costs.
Disclaimer: The opinions and recommendations made above are those of individual analysts or trading companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions
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Published: 28 Feb 2024, 17:13 IST
(tagsTo Translate)JK Cement