HDFC Securities analysts met JK Lashmi Cement’s management and iterated their Buy rating and target price. The brokerage believes that the company will see a compounded annual growth rate of 9% over the next two years as the cement major tightens its seat belt for expansion in the north. Also, a new brand to raise sales and a falling fuel price cut cost. The brokerage firm has a target price of Rs 872, an upside of 20%, with a ‘Buy’ rating on the stock.
HDFC Securities on JK Lakshmi Cement: Slow growth in FY25 to be turned around
The organization has initiated a brand improvement initiative and is also strengthening its green energy infrastructure while further decreasing lead distance. Plus, a decline in the crude oil prices is likely to help the compressed margins in FY25, which are likely to turn from poor to pricing. It will boost the margins to recover in FY26. “Subsequently, we estimate unit EBITDA to rebound from a six-year low of Rs 648 per MT in FY25 to Rs 863/968 per MT in FY26/27,” said HDFC Securities.
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Further, the company will get a boost from the new brand launch, helping elevate premiumisation and profitability. The company’s new brand ‘Green+’, keeping its cement bag’s price higher than existing premium brands. According to the report, the management stated that the market is giving a good response to Green+, hence they expect a substantial rise in sales over the coming years. “Therefore, in the upcoming years, JKLC expects an increase in sales of premium cement and an overall NSR/unit EBITDA gain of INRs 100/70 per MT,” said HDFC Securities.
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In line with the other cement companies, the cement company is also working on various cost reduction programs. It aims to increase the share of green power and fuel while lowering lead distance. Some of these milestones have been covered, and more are anticipated. “The share of low-cost green power consumption has steadily increased from 25/35% in FY22/23 to 39/47% in FY24/25,” said HDFC Securities.
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