ICICI Securities has given Buy recommendation for JK Cement recommended buy rating on the stock with a target price of Rs 3935 in its resear with a target price of Rs. 3935 in its research report issued on Mar 14, 2022

ICICI Securities research report on JK Cement

Key takeaways from JK Cement (JKCE) management concall on entry into the paint business: (a) maximum investment in paint segment would be Rs6bn over the next five years including any EBITDA loss in the initial years, and no additional debt would be raised at the paint subsidiary level; (b) listing of the paint business separately (once it attains scale / profitability) along with white cement / putty, remains an option in the long run; (c) target is to achieve 7-8% market share in paint in the focused markets of North / Central India with 15-20% EBITDA margin / RoCE in the medium term; and (d) all expansion plans in the core grey cement business remain intact. While JKCE’s diversification into paint may raise capital allocation concerns, the segment would likely remain a relatively small business for the company and constitute <5% of capital employed, revenue and EBITDA over the next five years, in our view.

Outlook

Maintain BUY with an unchanged target price of Rs3,935/sh (14x FY24E EV/E).

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