JK Lakshmi Cement stock is down nearly 9 percent in the past month and so far by 26.22 percent in 2022. Looking ahead, Axis Securities sees upside potential of 35% on the stock.
JK Lakshmi Cement’s stock price fell nearly 3 percent on Wednesday after the company shared its plans to do business. It is setting up a decorative paint production plant with a total capital investment of Rs 600 crore to be invested over a period of 5 years. Since the company has a very good presence in Wall Putty business in its core market, it would not go for price discounts to gain market share. “The paint business would also support the development of the putty business,” said Axis Securities. Domestic brokerage firm also added that the company’s foray into the paint business should be viewed from a long-term perspective.
JK Lakshmi Cement stock is down nearly 9 percent in the past month and so far by 26.22 percent in 2022. Looking ahead, Axis Securities sees upside potential of 35% on the stock. Shares of JK Cement traded at Rs 430, up 2.6 percent on the Bombay Stock Exchange.
Paint biz first year sales expected at Rs 100-150 crore
JK Lakshmi Cement’s painting business was set to come into operation in April 2024 with an expected turnover of Rs 100-150 crore for the first year. Initially, the company will focus on developing its paint business in its core market of North and Central India by targeting Level 3 and 4 cities. the organized and the unorganized part of the company.
Aims for 9-10% of its core market: The current size of the paint industry in India is between Rs 55,000-60,000 Cr and its core market accounts for 20-25% of the same, Axis Securities noted. The company is aiming for 9-10% of its core market to settle over time. It targets an EBITDA margin of 15-16% of the paint business moving forward.
JK Cement well placed to leverage existing dealer network, presence in Wall Putty biz to increase Paint’s business
Axis Securities said in its note that the company’s foray into the paint business should be viewed from a long-term perspective. “The company is well positioned to leverage its robust existing dealer network and strong presence in Wall Putty business to grow its paint business. The company’s capital commitment is in line with its ambition to become the leading regional player in its core markets and we expect this to deliver significant benefits over a long period of time,” the company said.
The company has a network of approximately 60,000 dealers and aims to utilize 70% of this existing network in addition to building a new dealer network for the paint industry. The company aims to be the regional player in the paint business with a sharp focus on North and Central India
JK Lakshmi Cement Stock Review: BUY
Target Price: Rs 3,100; Upward: 33%
Axis Securities expects the impact of higher costs in the cement business to push margins down. Demand for cement is expected to be good. We estimate that the company will record revenue, EBITDA and PAT CAGR of 12%, 15% and 21% respectively over FY22-24 as new capacity of 4 million per year in Central India is expected to come into operation by the end of FY23 taken. The brokerage has maintained the ‘Buy’ rating for the stock with a target price of Rs 3,100/share, implying a 35% increase.
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