Buy J K Cement; target of Rs 5950: Motilal Oswal

What happened

Motilal Oswal said J K Cement's second-quarter revenue and EBITDA rose 24% and 14% year on year to INR37.3b and INR5.1b, with volume up about 19% to 6.0mt. It reiterated BUY and set a target price of Rs 5950.

Confirmed

Global impact / market context

The target implies the broker expects the stock to rise. Profit per sale, which means margin, narrowed as costs rose faster than sales, so future gains depend on cement prices or cost control lifting profit per tonne.

Analyst inference

The stock trades at 17 times estimated EV/EBITDA for the coming fiscal year, a valuation metric comparing company value with operating profit. The broker values it at 17 times the following year's estimates, meaning the target rests on earnings growing into that multiple.

Analyst inference

What to watch

1. EBITDA per tonne, which means operating profit for each tonne sold, fell about 5% to INR848, while volume grew about 19% to 6.0mt. Confirmed
2. Motilal Oswal proposes a target price of Rs 5950, based on 17 times estimated EV/EBITDA for the following fiscal year, and reiterates its BUY rating on the stock. Proposed
3. Watch whether cement prices and energy costs allow profit per tonne to recover, because the target depends on earnings reaching the level implied by the following year's multiple. Analyst inference

Evidence

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