During the June quarter, JK Cement Ltd saw its gray cement volumes decline 19% year over year to 1.59 million tonnes. This compares to the industry’s drop in volume of nearly 30% year-over-year. Analysts say this highlights the company’s market share gains, which is being driven by its 50% capacity expansion in northern India.
In a post-earnings conference call, the company’s management said that while the industry saw its volume decline by 10% between July and August, the company’s volumes were up nearly 20% year-on-year.
Like its peers, the company has managed to keep other expenses under control. Its cost of operations per tonne fell 4.4% year on year in the June quarter, better than analysts’ expectations. Management stated that the first quarter of FY21 saw a sharp decline in fixed costs due to reduced consulting, administration, travel and branding costs. However, variable costs are expected to increase due to higher prices for petroleum coke (petroleum coke) and diesel. The price of company coke rose to $ 95 / tonne now from $ 60 / tonne in May of this year, management added.
Analysts are optimistic about the company’s growth prospects for several reasons. But after the recent surge, they don’t see the stock price moving very sharply from now on. Company shares peaked this year ₹1613 on August 7 on the NSE and currently trading at ₹1.487.
“While we love JKCE due to its exposure to the white cement segment, cost reduction initiatives and capacity expansion plans in gray cement, the recent rise in the share price leaves little room for a further rise, ”analysts at Emkay Global Financial Services said in a Sept. 2 report.
Competitor, analysts at Dolat Capital Markets Pvt. Ltd said the company’s strategic expansion of gray cement into high-priced northern / central markets would benefit. “However, the 19% rise in the share price after our June 18, 20 T4FY20 results update leaves a limited rise,” the September 2 Dolat report said.