JK Lakshmi Cement share gains as Motilal Oswal reiterates ‘buy’, sees 15% upside

Domestic brokerage Motilal Oswal has reiterated its “buy” call for JK Lakshmi Cement as the company expands its grinding capacity and looks to broaden its market presence. It has a target price of Rs 1,030 a share, indicating an upside of 15 percent from the current market price.

The share traded 2 percent higher in the opening hour. It pared some of the gains and was quoting at Rs 896.55 at 10.15 am, up by 0.5 percent from the previous session.

JK Lakshmi Cement is planning to take its grinding capacity to around 24 mtpa/30 mtpa (million tonne per annum) by FY27/FY30 from the existing 14 mtpa.

Following the release of its December quarter earnings, JK Lakshmi Cement announced its next phase of expansion in the east and central regions through a mix of brownfield and greenfield mode.

The firm has also announced an acquisition in the north-east region to broaden its market presence, making Motilal Oswal bullish on the cement player.

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The company is foraying into Northeast by setting up 1mtpa/1.5mtpa clinker/grinding capacity in Assam. The company is acquiring an 85 percent stake in Agrani Cement, which, along with its subsidiaries, holds mining rights in Assam, with limestone reserves of around 335mt. The project cost is estimated at Rs 1,000 crore and the project is likely to be completed in the next two years.

Motilal Oswal said that the company’s focus on geo-mix optimisation and increasing share of trade sales and premium products, along with better brand visibility, sustainable growth helped it achieve an EBITDA per tonne of Rs 1,021 in the third quarter of the current fiscal year.

The digitisation and automation measures have helped the firm increase yield value per tonne.

Motilal Oswal estimated that the EBITDA will have a CAGR of around20 percentover FY23-26, driven by 9 percent volume growth and 11 percent growth in EBITDA/t.

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