JK Lakshmi Cement extends rally, up 27% in 9 days; stock nears record high

Shares of JK Lakshmi Cement hit a fresh 52-week high of Rs 800, as they soared 7 per cent on the BSE amid heavy volumes in an otherwise range-bound market.

The stock of cement maker quoted higher for the ninth straight trading day and has rallied 27 per cent during this period.  In comparison, the S&P BSE Sensex was down 0.34 per cent at 62,656 at 01:57 PM. The average daily trading volumes at the counter jumped over three-fold, with a combined 1.7 million shares changing hands on the NSE and BSE.

With today’s rally, the market price of JK Lakshmi Cement has zoomed 117 per cent from its 52-week low of Rs 368.65, touched on May 12, 2022. It had hit a record high of Rs 815 on July 29, 2021.

For Q2FY23, JK Lakshmi Cement’s net sales rose 16 per cent year-on-year (YoY) to Rs 1,303 crore. Profit declined 22.7 per cent YoY to Rs 59.62 crore on higher input costs. The company said its profitability remained under pressure largely due to an unabated rise in global fuel cost. The company has been able to mitigate part of it by improving operational efficiencies, increasing the volume, optimising product mix and enhancing the premium product sales, it said.

Analysts at Anand Rathi Share and Stock Brokers have ‘Buy’ rating on JK Lakshmi Cement with a target price of Rs 828 per share. The company’s sharper focus on better realisations aided revenue growth, but the high-cost environment curbed its operating performance. The ongoing UCW expansion is on track and expected to be complete by FY24. Efforts like improving operating efficiency via more renewable energy/alternative fuel and increasing the blended cement share/premium cement would help, the brokerage firm said.

Housing and infrastructure are two key segments that account for more than 80 per cent of total cement consumption in the country. In Financial Year 2022-23, cement production in India is expected to increase by around 12 per cent YOY, driven by rural housing demand and government’s strong focus on infrastructure development, JK Lakshmi Cement said in its FY22 annual report.

Further, the Indian cement industry is likely to add ~ 80 million tonnes capacity by financial year 2024, the highest since the last 10 years, driven by increasing spending on housing and infrastructure activities. In October 2021, Hon’ble Prime Minister, Shri Narendra Modi, launched the ‘PM Gati Shakti’ – National Master Plan for multimodel connectivity. Gati Shakti will bring synergy to create a world-class, seamless multimodal transport network in India. This will boost the demand for cement in the future.

Indian cement companies are amongst the world greenest cement manufacturers. With high allocation under the Union Budget 2022-23 for infrastructure, affordable housing schemes and road projects to fuel the economy, the domestic cement industry is poised for large surge. In 2021, as ‘Work From Home’ is being adopted at a faster pace amidst the Pandemic, the demand for affordable housing, with ticket size of Rs 40-50 lakh, is expected to rise in Tier II and Tier III cities leading to an increase in demand for cement, the company said.