Comments
Sushil Finance
JK Cement (Buy)
CMP: ₹507.75
Target: ₹635
Strength: Second largest player in high margin white cement and wall putty business. Weakness: High operating cost of existing northern plants and lower utilisation of southern plant. Opportunity: Capacity coming up in high growth northern market and reducing lead time. Threat: Delay in volume growth picking up and rise in input cost and lower capacity utilisation.
We believe cement is the best commodity to play the Indian infrastructure story. Cement by virtue of its nature is not impacted by international prices and is driven by the domestic demand-supply scenario. The cement industry had the toughest time in recent years due to over capacity and lack of demand on the other hand. The industry utilisation levels have been around 70 per cent. However, excluding south, which is facing severe over capacity condition, the utilisation rates are in the range of 85-90 per cent. In the absence of any major capacity being added in the northern part we like companies which are coming up with capacity when the apparent demand seems picking up.
Though JK Cement has gone by about 3 x in the last six months, with an improving macro coupled with renewed focus on infra and housing, we believe the best days are yet to come.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.