Buy JK Cement; Target price of Rs 1,205: Nirmal Bang

By: | Updated: September 27, 2016 1:51 PM

Brokerage firm Nirmal Bang upgraded JK Cement shares with a target price of Rs 1,205 from Rs 1,023 earlier.

BSE Sensex, NSE NiftyBrokerage firm Nirmal Bang upgraded JK Cement shares with a target price of Rs 1,205 from Rs 1,023 earlier. (Photo: PTI)

Brokerage firm Nirmal Bang upgraded JK Cement shares with a target price of Rs 1,205 from Rs 1,023 earlier. In the past one year, shares of the company have risen 31.88 per cent to Rs 828.90 on September 26, whereas BSE Sensex gained 10 per cent during the same period. For the quarter ended June 30, 2016, the company reported a net profit of Rs 60.85 crore against Rs 1.06 crore in the corresponding quarter a year ago. Net sales of the company increased by 9.19 per cent year-on-year to Rs 886.71 crore.

JK Cement has higher exposure to northern region as well as Maharashtra and Karnataka markets. While prices in northern region improved in March 2016 and shown greater resilience, other markets of the company like Maharashtra and Karnataka – which had a weak price environment – have also started improving. Nirmal Bang believes that barring a few markets like Gujarat, Goa and Kerala which account for about 5-6 per cent of its total sales, all other markets have shown significant traction in terms of pricing, which augurs well for the company.

The company reported a sharp uptick in white cement and wall putty volume in April-June 2016 quarter at 17.7 per cent and 33.7 per cent year-on-year, respectively. The volume growth in white cement business surprised Nirmal Bang positively on the back of better demand in both segments.

Nirmal Bang in a research note said, “We have increased our EBITDA estimates for JK Cement on the back of improved cost structure and better cement prices in its key regions. We have made minor changes to our estimates on grey as well as white cement and believe that JK Cement can deliver 25 per cent EBITDA CAGR over FY16-FY19E compared to our earlier estimate of 18 per cent.”

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