HDFC Securities has highlighted JK Lakshmi Cement Ltd. as one of its top Diwali picks for Samvat 2081, recommending a buy range of ₹738-819 with a target price of ₹936. The stock is expected to see a strong rally driven by capacity expansion, operational efficiency, and favorable demand trends in key markets.
About the Company
JK Lakshmi Cement is a key player in India’s cement sector, with a formidable presence in Northern, Western, and Eastern India. It operates two fully integrated plants in Rajasthan and Chhattisgarh, alongside four strategically located grinding units. The company has a total capacity of 16.4 million tonnes per annum (MTPA) of cement and 10 MTPA of clinker. It also provides a variety of value-added products, including ready-mix concrete, gypsum plaster, and construction chemicals.
Valuation and Recommendation
JK Lakshmi Cement is poised for healthy growth, supported by capacity expansion and a pickup in demand in critical markets. The company expects its revenue, EBITDA, and PAT to grow at a CAGR of 7.6%, 15.7%, and 13.9% respectively over FY24-FY26E. HDFC Securities recommends buying the stock in the ₹738-819 range, with a target of ₹936 (18x FY26E EPS) by next Diwali.
Key Financials (FY22-FY26E):
- Net Revenue: ₹5,420 crore (FY22) to ₹7,858 crore (FY26E)
- EBITDA: ₹951 crore (FY22) to ₹1,408 crore (FY26E)
- PAT: ₹463 crore (FY22) to ₹612 crore (FY26E)
- EPS: ₹39.4 (FY22) to ₹52 (FY26E)
- P/E: 20.6x (FY22) to 15.6x (FY26E)
- Return on Equity (RoE): 18.4% (FY22) to 15.2% (FY26E)
Key Triggers
- Capacity Expansion: JK Lakshmi Cement has recently expanded its capacity to 16.4 MTPA, with plans to reach 24 MTPA by FY27 and 33 MTPA by FY30. This growth is expected to drive significant volume growth.
- Operational Efficiency: The company’s EBITDA per tonne improved by 21% year-on-year (YoY) in FY24, with future savings projected through increased use of green power and alternative fuels.
- Healthy Demand Outlook: The cement industry is expected to grow at a healthy rate of 8-9%, driven by government infrastructure projects and rural housing initiatives under PM Awas Yojana.
- Consolidation to Improve Margins: The company expects consolidation within the cement sector to benefit players by improving pricing power, economies of scale, and supply chain efficiency.
Key Concerns
- Soft Cement Prices: Cement prices have remained under pressure, which may affect margins if the current price hike trend doesn’t continue.
- Capacity Expansion Delays: Any delays in achieving its targeted 30 MTPA capacity by FY30 could impact market share and profitability.
Disclaimer: Investments in the stock market are subject to market risks. The views and recommendations provided in this article are based on analysis from HDFC Securities and do not constitute investment advice. Investors are advised to perform their own research and consult with financial advisors before making any investment decisions. Past performance is not indicative of future results, and the author and publication are not responsible for any losses incurred based on this information. Please read all scheme-related documents carefully before investing.
