JK Cement on a firm footing

JK Cement stocks have moved up from Rs 132 to Rs 170 over the past few months. Strong profit growth during the March and June quarters has aided the stock’s appreciation. JK Cement has also benefited from the current recovery in cement stocks.

Local analysts continue to be positive on the stock, given the company’s aggressive expansion plans, strong cash flows and cost savings of close to Rs 100-150 per tonne due to the commissioning of its captive power plant. ET Investor’s Guide advises existing investors to stay invested in the stock, while new investors can accumulate it at current prices.

JK Cement is a regional cement player with two grey cement plants in Rajasthan having a combined capacity of 4 million tonnes and a 350,000tpa white cement unit. The company serves markets in North India, Gujarat and Madhya Pradesh. It is now spreading its geographical footprint by setting up a 3.5 mt per annum greenfield unit in Karnataka. Scheduled to be commissioned by September/October ’08, the total project cost is Rs 1,070 crore, including a split grinding unit and a 50-mw captive power plant.

The unit will give JK Cement access to consumers in Karnataka, Goa and parts of Maharashtra. The company claims there are no other cement plants within a 200-km radius of its proposed unit. This will give it an uncontested access to consumers in the area, and also make it less vulnerable to price competition. This will put JK Cement into the league of India Cements, Century Textiles and Jaiprakash Associates. The project will also reduce the company’s dependence on prices in North India.