 "JK Cement hits new high; rallies 14% in 2 weeks on healthy growth outlook")
Shares of JK Cement hit a new high of Rs 4,969.95, gaining 3 per cent on the BSE in Wednesday’s intra-day trade, thus extending its upward movement on expectations of healthy volume growth in the March 2025 quarter (Q4FY25). In the past two weeks, the stock has rallied 14 per cent.
JK Cement is one of India’s leading manufacturers of grey cement and one of the leading white cement manufacturers in the World. The company has an installed grey cement capacity of 24.34 million tonnes per annum (mtpa) & white cement capacity of 3.05 mtpa.
JK Cement reported decent results for the December 2024 quarter (Q3FY25) with revenue at Rs 2,930 crore largely in-line with analysts estimate; but earnings before interest, tax, depreciation and amortisation (EBITDA) was slightly below estimate owing to higher than expected costs.
The consolidated volume remained muted in the April to December period (9MFY25) due to weak demand during H1FY25. However, the volume has picked-up in Q3FY25 with 12.6 per cent quarter-on-quarter (QoQ) growth. For January to March 2025 quarter (Q4) the management guided for 7-8 per cent year-on-year (YoY) volume growth in grey cement; it is likely to grow at least 10 per cent YoY in FY26.
JK Cement aims to double its grey cement capacity to 50mt by FY30 (14 per cent compound annual growth rate (CAGR), ~2.5x ahead of industry forecast), which will enable it to register strong volume growth with market share gains over the next few years, according to analysts at JM Financial Institutional Securities.
Analysts at ICICI Securities believe that the company’s volume shall improve further in Q4FY25 and FY26E-27E, led by pickup in demand, capacity addition plan and improvement in capacity utilization of recently commissioned plants (~4 mtpa added in the last 1.5 years). The brokerage firm estimates consolidated volume CAGR of ~8 per cent over FY24-27E. In the longer term, company aims to reach total capacity of 50 mtpa by FY30E, which gives longer-term volume growth visibility.
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Analysts believe operational performance to improve owing to healthy volume growth (led by healthy expansion plans, ramp-up of existing capacities & demand pick-up) & cost saving initiatives. “We expect revenue growth of 8.8 per cent CAGR over FY24-27E, while EBITDA & PAT CAGR at 14.5 per cent & 19.3 per cent respectively over the same period,” the brokerage firm said with ‘buy’ rating on stock and target price of Rs 5,700 per share.
JK Cement reported 5 per cent YoY growth in Grey Cement volume and 6 per cent in White Cement. Given the challenging conditions, Centrum Broking believes that realizing Rs 1,000/mt EBITDA is a good achievement. Overall, the company’s journey is on track with addition of 6mn mt capacity expected in MP, Bihar and UP by Q4FY26. The management announced the acquisition of a small J&K based player, which will help the company in establishing presence in the state, the brokerage firm said.