Hold JK Cement; target of Rs 190: ICICIdirect.com

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26 Aug, 2025 12:21

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"J. K. Cement's Q3FY14 performance has again been impacted by the weak realisation trend in grey cement that persisted throughout the quarter despite an attempt to increase prices in September 2013. During the quarter, average grey realisation went down over 14 percent YoY to Rs 3,399/tonne. However, with lower realisations, the company reported grey cement volume growth of 4.8 percent to 1.32 MT after reporting de-growth in the previous two quarters. For 9MFY14, grey sales volumes came in at 3.85 MT vs. 4.14 MT last year (down 6.5 percent YoY). In the white segment, volume growth moderated to ~6 percent YoY to 1.25 lakh tonnes, lowest in the last six quarter from high growth of 34 percent in Q3FY13 due to capacity constraints. Including putty sales volume (i.e. 87000 tonnes, up 21 percent YoY), white segment reported volume growth of 11.7 percent YoY. Blended realisations of Rs 4,405/tonne (down 7.1 percent YoY) were lower than our estimates (i.e. Rs 4,598/tonne) due to a sharp fall in grey cement realisations. Weak and very poor pricing in Andhra Pradesh has been a key driver to spoil the overall south market. In the north, the sand mining ban affected demand in this quarter, which, however, was lifted from December 2013 onwards. Given the challenging macro environment, we expect blended cement volumes to decline 4 percent in FY14E to 6.0 MT while it is likely to improve 13 percent in FY15E post capacity expansion."

"At the CMP of Rs 179, the stock is trading at 11.1x and 8.3x its FY14E and FY15E EV/EBITDA, respectively. On an EV/tonne basis, the stock is trading at USD 49 its FY15E blended capacity of 10.9 MT, which leaves room for upside. However, a re-rating is unlikely in the near term given the challenging macro environment. Hence, we maintain our HOLD rating with a revised price target of Rs 190/share (i.e. at 8.5x FY15E EV/EBITDA)," says ICICIdirect.com research report.

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