JK Cement’s Growing Market Share a Positive
JK Cement Ltd, which is focused in the north and central India markets, is seeing market share gains. Grey cement volumes of the company, which had ramped up its recently commissioned plant in north India, declined 19% year-on-year (y-o-y) to 1.59 million tonnes in the June quarter, a fall that is lower that its peers. Industry volumes in the company’s key markets of north and central India contracted by 30-35% in the June quarter, analysts say. Its management’s commentary on demand recovery for the September quarter is optimistic as well. From July-August, JK Cement’s grey cement volumes have seen a growth of 20% y-o-y. Volumes in the white cement or putty segment have largely normalized. Out of the total planned capacity addition of 4.2 million tonnes per annum (mtpa), JK Cement has commissioned 3.5 mtpa. It expects to see a delay in the commissioning of the 0.7 mtpa capacity addition in Gujarat to the December quarter of the current fiscal year. These will boost the company’s total capacity to 14.7 mtpa, around 40% higher from its fiscal year 2019 level. The management expects to incur ?700-800 crore of capital expenditure in FY21 on its Mangrol, Nimbahera, Balansinor, and Panna projects. JK Cement’s presence and expansion in the favourable pricing region is positive, say analysts. However, after the recent run-up in the stock, analysts see limited upside from its new highs. Seasonal demand weakness is expected to keep cement prices in correction mode in the September quarter. Further, the management has cautioned of a spike in variable costs in the coming quarters because of increased petroleum coke and diesel prices. The cost of key input material petroleum coke has increased to $95/tonne now from $60/tonne in May, the management said.
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