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Monday, March 14, 2011

Mid cap stock analysis - JK Cement

Let's have a look at a mid cap stock JK cement, which is turning around from the losses it posted in previous quarter. Here is stock analysis of JK Cement for medium to long term time horizon.

JK Cement is mid-sized cement producer in India. JK Cement has recently put up and started production in south India based plant with three million tonne (mt) capacity. This was as part of of company's plans to expand business in South India.

Company was mainly catering to North Indian market till now. It is expecting that demand in cement sector will be back and grow in medium term future and so preparing to cater the growth in northern as well as southern areas.

Cement sector outlook
The cement sector, for some time now, is running sluggish for some time now. If you look at the time period from November-December till monsoon i.e. June, it is the peak period of construction and so the demand in cement sector is expected to pick up. Rising costs of power and transportation on account of rising fuel costs remains a major concern for cement sector though.

JK Cement's total cement production capacity was 7.9 mt at the end of March 2010. This is 80% more from what it was three years ago. With new cement plant in Karnataka which also has has a 50 megawatt captive power capacity.

JK Cement is planning to expand its grey cement capacity by 2.2 mt at its existing plant in Rajasthan. Company is also planning to add 1.8 mt of grinding facilities in north India. The capital expenditure is estimated at Rs.1,500 crores including additional captive power facilities. This would be on stream within 2 years.

Stock Financials
In December 2010 quarter, net sales of JK cement was Rs.476.34 croes, marginally up from previous and Dec.09 quarters. Company's net profit was Rs.1.83 crores against loss of Rs.20.84 crores in previous quarter. Company had hardly posted losses in near past which it did in September 2010 quarter on account of increase in power and fuel costs. This shows stock is recovering from these losses with positive measures and growth in realizations.

More mid cap stocks discussed
Stock Valuation
At current stock price of Rs. 134 per share, JK Cement stock trades at P/E of around 12 trailing four-quarter basis. India Cements is a leading player in cement sector of India is trading at a P/E of more than 45 times on a trailing basis. So purely on valuations basis, JK cement is trading at discount to it's actual valuations. It has a good chances of growing it's financial numbers in coming quarters. One my consider buying stocks of JK Cement for medium to long term.

1 comment:

  1. I think one can think about Mangalam Cement in this sector.
    What's your view on it?

    ReplyDelete

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