Buy J K Cement; target of Rs 5000: Motilal Oswal

Motilal Oswal is bullish on J K Cement has recommended buy rating on the stock with a target price of Rs 5000 in its research report dated October 29, 2024.

Broker Research

October 31, 2024 / 12:31 IST

Buy

Motilal Oswal's research report on J K Cement

JK Cement (JKCE)’s 2QFY25 consolidated EBITDA was at INR2.8b (down 39% YoY) and ~22% below our estimates due to lower-than-estimated sales volume (6% miss) and higher-than-estimated opex/t (+5% vs. our estimate). Higher opex/t was partly due to: 1) higher branding expenses; 2) clinker purchases for its South plant due to the shutdown; and 3) higher maintenance costs. EBITDA/t declined 36% YoY to INR656 (est. INR787) and OPM contracted 6pp YoY to 11% (est. 14%). Adj. PAT declined 80% YoY to INR359m (60% miss). Management trimmed its gray cement volume guidance to ~6-7% YoY (vs. earlier estimate of ~10%). Cement demand has improved and the company expects volume growth YoY in Oct’24. The capacity expansion plan of 6mtpa is on track and expected to be commissioned in 2HFY26. Further, the company aims to realize cost savings of up to INR60/t in FY25E out of its cost-saving target of INR150-200/t in the next two years.

Outlook

We estimate its revenue/EBITDA/PAT CAGR at 9%/13%/18% over FY24-27, driven by a 9% CAGR in sales volume and improvement in EBITDA/t. The stock trades at 15x/12x FY26E/FY27E EV/EBITDA. We value the stock at 15x Sep’26E EV/EBITDA to arrive at our revised TP of INR5,000 (earlier INR5,270). Reiterate BUY.

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