JK Cement is under pressure because the margins did contract and therefore the stock is under some pressure.
However, Citi has come out with a note and they say at current valuations the upside appears limited. Hence, they have downgraded the stock to 'neutral' from 'buy'.
The target price has gone up to around Rs 3,800. The key reason is that they are valuing the stock at around 14 times its forward EBITDA that is EV upon EBITDA which is a bit of a premium in comparison to what it has been trading for the last five years that is at around 10 times EV upon EBITDA.
A few factors that Citi has pointed out is that JK Cement in the last six months is up by close to around 30 percent. It is trading at around 14 times the EV upon EBITDA. Now its peers like Ramco Cements or even Dalmia Cement both are up between 15 to 25 percent and they trade at around 13 times EV upon EBITDA.
Now for Citi their preference is Ramco Cements. They added that for JK Cement it appears that the potential positives are in the price that could include maybe some price hikes, maybe cooling of input costs, like coal costs, diesel costs. At current prices, it appears it is in the price, so that is why Citi has gone ahead and downgraded the stock.