JK Cement -Value Pick.-- Anand Rathi

Closing 304          Reco: Buy        Expected Value 404            Nifty Level 5888

  

• Multi product and multi region play

One of the largest cement manufacturers in North India and second largest producer of white cement in India.

Known for brands like – JK Cement, Sarvashaktiman, JK Super.

• Expansion plans to be the trigger going forward

Grey cement – The company plans to augment its grinding capacity by 3mn tons at Haryana and Rajasthan.

White cement – Plans to set up 0.6mn tons plant in UAE  for Middle East markets.

• Volume and Price increase are the important parameters for the performance

The company has been enjoying good volume growth compared to its peers and price increase is also helping on the realizations front.

• Consistent dividend payer

20% payout ratio.

Valuations

At our target price of 404 the stock would trade at 5.8x FY14E EV/EBITDA and at a PE of 9x in the same period. With expansion plans on track and added advantage of white cement growth will be beneficial for the company’s growth potential going forward

Thanks & Regards

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