JK Cement stock falls 6% on 30% fall in Q1 profit; should you buy, sell or hold JK Cement stock? JK Cement stock price tanked 2% today to Rs 3,078.6 after the company’s consolidated net profit declined 29.5% on-year to Rs 114.7 crore. However, following the announcement of its first fiscal quarterly earnings, the scrip has tanked 6% to touch lows of Rs 3,060 apiece on Wednesday from Friday’s closing price, before the results were announced.The consolidated EBITDA for Q1FY24 of JK Cement stood at Rs 4.8 billion, up 1% on-year and 17% on-quarter owing to strong volumes and lower costs. JK Cement recorded a total revenue of ₹2,794 crore for the June quarter, marking an increase on-year from ₹2,287 crore. Meanwhile, total expenditures for the reviewed quarter amounted to ₹2,598 crore, as opposed to ₹2,036 crore in the same period from the prior year. “We maintain our REDUCE rating on JK Cement (JKCE), with an unchanged TP of INR 2,755 (11x Mar-25E consolidated EBITDA). We estimate ~INR 210/MT YoY improvement in margins in FY24, owing to the sharp cool-off in fuel cost and a greater share of green power. The upcoming expansion in UP and MP will increase grey cement capacity to 24mn MT in FY25E.” Buy | Target price : Rs 3560 “Power & fuel costs are expected to reduce by Rs 250-Rs 275 on a per tonne basis in FY24. Furthermore, the operating costs of new units are expected to normalize as utilization further improves in FY24, which will drive EBITDA margins moving ahead. We expect the company to report an EBITDA/tonne of Rs 1,060, higher by 31% YoY and will be driven by higher volumes, stable realizations, and lower costs. We maintain our BUY recommendation on the stock.” Hold | Target price: Rs 3324 “JKCE trades at FY24F/25F EV/EBITDA of 15.1x/13.1x, respectively. We like JKCE’s presence and new expansion in the regions having favourable demand and pricing, but we feel the current EV/t limits any further upside in the stock. We retain a HOLD rating on it with a Sep 2024F target price of Rs3,324, set at one-year forward EV/EBITDA of 13.5x (unchanged).”
The Japanese pharma major is also filing a plea before the Delhi HC seeking appointment of forensic auditors to analyse transactions involving IHH, Fortis Healthcare and RHT, Singapore, as directed by the HC on October 18.
The development is likely to create legal hurdles and delay the proposed open offer as IHH had recently told FE that it could only go ahead if Sebi agreed with its legal interpretation that the SC’s September 22 order has lifted all such restraints.
IHH managing director and CEO Kelvin Loh told FE on November 9 that the company would like to go ahead with the open offer “as soon as possible” as there has already been a delay of four years. Ravi Rajagopal, chairman of Fortis Healthcare, had added that their legal counsel has advised that the company can go ahead with the open offer as the SC order has disposed of various appeals, including the suo motu contempt. “We have represented to the Sebi and the matter is with them,” Rajagopal had said.
However, legal observers told FE that the matter is not that straightforward and simple as the Delhi HC has to take the final call on the matter of open offer as well as whether a forensic audit has to be done in the share sale which was executed in 2018.
Also Read: IHH to float open offer for Fortis if Sebi concurs with our legal view: MD & CEO
Loh and Rajagopal had said the possibility that the matter may take a different turn when it comes up in Delhi HC cannot be ruled out.
IHH had in July 2018 acquired a 31% stake in Fortis Healthcare for Rs 4,000 crore through the bidding route. It had also earmarked Rs 3,000 crore to make an open offer for an additional 26% to the public shareholders as required under the law.
Daiichi has written to Sebi that the SC in its September 22 order had asked the HC to consider ordering a forensic audit into the dilution of FHL shareholding, repeated violation of undertakings and assurance by former FHL promoters — Malvinder and Shivinder Singh — and the transaction between FHL, IHH and the clandestine transfer of Rs 4,666 crore to RHT Singapore.
Daiichi is “severely prejudiced” with IHH’s clandestine attempt to subvert the status quo order directed by the SC on December 14, 2018, and September 22 with respect to the conduct of forensic audit and the pending proceedings before the HC by purportedly consulting regulatory authorities, including Sebi, on the proposed FHL-IHH transaction. It has reiterated that the FHL-IHH transaction was currently sub-judice before the HC where FHL is also a party, its solicitors, P&A Law Offices, have said in the letter.
“We further state that any such attempt by FHL and/or IHH to proceed with the FHH-IHH transaction would be in direct contravention of the HC and SC orders,” the letter sent by the law firm has stated. Daiichi Sankyo is pursuing the enforcement of Rs 3,500-crore arbitration award against the Singh brothers pronounced by a Singapore tribunal for concealing information when they sold Ranbaxy Laboratories to it for $4.6 billion in 2008. The apex court had in 2018 put on hold the sale of Fortis Healthcare to IHH on a contempt plea filed by the Japanese drugmaker against the Singh brothers.