Buy JK Cement; target of Rs 6078: Anand Rathi

Moneycontrol • 4 days ago

Original source

Key Investment Pillars

  • Capacity Expansion: JK Cement aims to increase its grey cement capacity to 40m tonne by FY28 and 50m tonne by FY30, with a focus on brownfield expansion.
  • Market Share Gain: The company has gained market share in Central India, with a stable market share in Northern and Southern markets, and is expected to continue this trend.
  • Cost Rationalization: JK Cement is focusing on cost-saving initiatives, including optimization of fuel-mix and increasing the share of green power to 75% by FY30.
  • Diversification: The company is expanding its putty, paints, and RMC businesses, with a target of reaching Rs1bn/quarter in RMC revenue by Q4FY27e.

Thesis Validation Checklist

To validate the analyst's thesis, investors should watch for:

  • Volume growth: JK Cement's ability to deliver double-digit volume growth in FY27e, driven by capacity ramp-up and market share gain.
  • Margin expansion: The company's ability to maintain or expand its margins, despite cost pressure, through cost-saving initiatives and price hikes.
  • Debt reduction: JK Cement's ability to reduce its net debt/EBITDA to within 1.5x over 2-3 years post-completion of expansion.
  • Green energy share: The company's progress in increasing its share of green power to 75% by FY30, which would help in cost rationalization.