Emkay Research neutral on JK Cement

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Emkay Research neutral on JK Cement

Emkay Research has maintained neutral rating on JK Cement with a revised price target of Rs 203 in its February 5, 2008 report.

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Emkay Research has maintained neutral rating on JK Cement with a revised price target of Rs 203 in its February 5, 2008 report. "JK Cement's (JKC) Q3FY08 net profit of Rs.802 mn is ahead of our expectations primarily because lower than expected raw material costs and lower than expected tax rate for the quarter. We are upgrading our earnings estimates for JKC by 18% for FY2008 and 19% for FY2009. The stock currently trades at 5X its FY2009 earnings. On EV/ton basis the stock trades at USD57 for its FY2009E capacity. We agree JKC offers attractive valuations, but we are concerned about the pricing discipline of players in the northern region once the large stream of new capacities becomes operational which in turn would lead to downturn in cement prices. Further JKCL earnings is extremely leveraged to cement prices and cement prices in the northern region are already subdued. Hence in a scenario of moderate oversupply, the impact of softening cement prices can have adverse impact on JKCL's earnings. We maintain our Neutral rating on the stock with a revised price target of Rs 203." According to Emkay Research report.

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