Cement stocks rise on positive outlook; JK Cement scales fresh record high

JK Cement zoomed 5% to Rs 1,314, while Shree Cement gained 3 per cent to Rs 21,748, and was trading close to its all-time high level of Rs 22,200 touched on July 1, 2019, on the BSE today

Shares of cement manufacturers were back in the focus on Tuesday with JK Cement rising 5 per cent to hit a new high of Rs 1,314 on the BSE. The stock surpassed its previous high of Rs 1,307 recorded on January 3.

Thus far in the calendar year 2020, JK Cement has outperformed the market by surging 12 per cent in the past week, as compared to a per cent decline in the S&P BSE Sensex. In CY19, the stock had zoomed 64 per cent as against a 14 per cent rise in the benchmark index.

JK Cement had reported more-than-double consolidated net profit at Rs 198 crore during the first half (April-September) of financial year 2019-20 (H1FY20). Ebitda (earnings before interest, tax, depreciation and amortisation) margin, too, had improved to 20.5 per cent from 14.3 per cent. Benefitting from healthy realisations and cost savings, the company reported an all-round good performance.

JK Cement is one of leading cement players with 11.5MTPA grey cement capacity (including 8.5MTPA in North). It's the second largest manufacturer of White cement (in a duopolistic market segment) and Wall Putty in India, with an annual capacity of 0.6MTPA and 0.9MTPA respectively.

“Ongoing capex towards 40 per cent increase in its grey cement capacity will not only boost volume growth but also drive improvement in profitability due to higher proportion of volumes from newer efficient units,” analysts at Antique Stock Broking said in sector update. The brokerage firm initiates coverage on the stock with a ‘buy’ rating and target price of Rs 1,430 per share.

Meanwhile, Shree Cement gained 3 per cent to quote at Rs 21,748, and was trading close to its all-time high level of Rs 22,200 touched on July 1, 2019. In the past four trading days, the stock has gained 7 per cent after Care Ratings reaffirmed the credit rating for the company’s commercial paper issue and bank facilities.

In November, Shree Cement had raised Rs 2,399 crore through qualified institutional placement (QIP) route, at price of Rs 19,300 per share. The company had said it would utilize the funds for business purposes such as funding future growth opportunities and/or strategic acquisitions, working capital requirement and pre-payment and/or repayment of loans.

“Going forward, with strong capacities in pipeline and likely recovery in demand with benign cost environment, we foresee Shree Cement to report sustained growth in the ensuing quarters. Upgrading our EBITDA estimates by 8 per cent/11 per cent for FY20E/FY21E mainly to factor in higher realisation and lower cost,” analysts at Reliance Securities had said in Q2 result update.