With the continuous negative sentiment in the Indian Share Market from last two weeks, investors are looking for opportunities to take benefits from Short Positions. Today, We have such an opportunity analysis for JK Cements Limited.
JK Cement’s (JKCE) 1QFY24 EBITDA came much below our estimates mainly led by lower realizations. Strong industry demand growth, stronger prices in North and lower energy prices should improve margins in coming quarters. The 4 mtpa central India plant has ramped up well and operating margins of the plant are now similar to existing plants.
Management commentary suggests that competitive intensity in the putty segment remains high and margins are unlikely to revert to historical levels. We revise Fair Value to Rs2,400 on rollover. Maintain SELL rating on expensive valuations. We will discuss Rationale, Positives, Negatives and SL Targets for JK Cement Limited Stock:
Rationale:
- Q1FY24: Margin recovery slowed down by lower realizations.
- Cost pressures have peaked and margins at bottom.
- Growth capex would lead to absence of FCF in FY24E; but the same is expected to
pick up meaningfully over FY25-26E. - We have cut our EPS estimates by 6% for FY24/25E.
- We expect earnings to grow by 87.1% in FY24E and grow by 18.5% in FY25E.
- Fair Value is based on 8x Sep’24E EV/EBITDA; maintain SELL on expensive valuations.
Q1FY24 Earnings update:
Positives: - Grey cement volumes increased to 41 lakh tons (+29% yoy) due to Panna expansion.
- Pet coke and thermal coal prices have corrected ~30% in CYTD23.
Negatives
- Blended realization declined by 0.4% qoq.
- EBITDA of Rs402 cr (-1.1% yoy), below our estimates of Rs488 cr.
- Blended EBITDA of Rs893/ton was down 22% yoy
Research
Suggested Trade Opportunity for this stock is to Sell for the targets 2400. The recommended entry price is 3050.
Resistance Levels
First Resistance: 3098.9
Second Resistance: 3120.8
Third Resistance: 3155.1
Support Levels
First Support: 3042.6
Second Support: 3008.3
Third Support: 2986.4
Use these levels and data to make your entry and earn profits in JK Cements Limited. Please note that this research is based on our analysis and we advice you to consult your financial advisor before taking any Trade or Investment.
