Shares of JK Cement gained on July 23 as brokerages raised target prices on the stock after the company reported a 67 percent on-year increase in its consolidated net profit to Rs 184.82 crore for the fiscal first quarter (Q1FY25).
The cement maker's revenue from operations edged up 1.62 percent to Rs 2,807.57 crore.
Citi has issued a sell call on JK Cement. However, the brokerage raised the target price to Rs 4,400 per share from Rs 3,550 earlier. The company's Q1 EBITDA increased by 19 percent on-year, driven by higher sales volumes and lower costs, which contributed to an outperformance compared to estimates, according to Citi.
The company is on track to expand its capacity to 30 million tonnes per annum (mtpa) by FY26, up from the current 24 mtpa, with plans to reach 44 mtpa by FY30, the international brokerage said.
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However, industry demand growth is expected to be softer compared to recent years, and with a muted pricing environment, the next phase of capacity expansion is more than a year away, limiting potential upside, said Citi in its note.
JK Cement is currently trading at an enterprise value per tonne (EV/t) of $140, compared to other regional cement producers at $70-110/t, Citi added.
JK Cement delivered 6 percent YoY volume growth in the April-June quarter with elections and extended heatwaves playing spoilsport. EBITDA was hit by lower-than-anticipated blended realisations, owing to a consistent rollback of prices.
However, analysts at Nuvama like the company for its consistent volume growth, capex plans, improvement in efficiency and superior return on equity (RoE).
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"We like JK Cement for its consistent volume growth visibility complimented by structural positives of improving regional mix (rising exposure in North + Central India) and improving efficiency mix (rising share of modern plants and higher blending)," said Nuvama as it maintained a 'buy' rating on the stock with a revised target price of Rs 5,339, up from Rs 5,027 earlier.
The brokerage sees a sharp decline in cement prices, demand or a sharp increase in input cost as the key risks.
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