JK Cement engages in paint business; Share increased over 11%
New Delhi: Cement maker JK Cement has announced a foray into the paint business. The company’s board of directors met on Saturday and approved a proposal to enter the coatings sector with an investment of Rs 600 crore over five years.
JK Cement will enter the paint business through a wholly owned subsidiary.
Shares of the cement maker fell as much as 12.32% to a 52-week low of Rs 2,313.20 in intraday trades on Monday. Even so, the stock was down 11.50% at Rs 2,334.90 on the BSE index.
JK Cement cracked 11.31% to close at Rs 2,341.20 on NSE.
Here’s what Brokerages had to say:
Kotak Institutional Equity: “The strong growth potential of the decorative coatings industry, thanks to its volume, pricing strength, improving margins (despite short-term inflationary pressures) and high valuations of the decorative coatings industry has attracted three new players (JSW group) , Grasim and now JK Cement) in recent years The company has some access to a paint dealer network through putty distribution; however, it will not be easy to position itself. In the decorative coatings sector due to increasing competition and inherent challenges it is difficult for new entrants to gain market share in the mid- to high-end emulsions which account for the majority of profits. I expect JK Cement to scale up gradually at best.”
Emkay Global Financial Services: “The paint business through its 100% owned subsidiary will undertake the production, sale, trade, import and export, and in other words trade in all paints and products and related services The establishment of a subsidiary should focus a minority on the paint business JK Cement is aiming to produce various products (including value added) and has a revenue target of 850 Rs crore over the next five years. Challenges. We rate the stock “Hold” with a target price of Rs 3,150. We have not included the paint business in our estimate.”