Reduce JK Cement; target of Rs 2485: HDFC Securities

HDFC Securities' research report on JK Cement

In Q3FY23, JKCE reported healthy consolidated volume growth of 21/11% YoY/QoQ, led by strong traction in grey cement, while white volumes declined. Consolidated unitary EBITDA contracted INR 230/MT QoQ on stabilisation expense in grey, competition pressure in the white segment, and an increase in fuel and freight costs. Fuel cost is expected to cool off by 8% QoQ in Q4. JKCE’s 4mn MT central expansion got commissioned in Q3FY23. The company will further add 5.5mn MT of grey cement capacity spread across the north, central and south and 0.66mn MT clinker across the central region (Panna) by FY25E to strengthen its distribution reach.

Outlook

We maintain our REDUCE rating on JK Cement (JKCE) with a lower TP of INR 2,485 (11x Mar-25E consolidated EBITDA). We believe its margin will be subdued for the next 2-3 quarters, on account of Panna stabilisation costs and intensifying pressure in white cement.

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