Motilal Oswal sees up to 70% upside in this stock! Should you buy now?

Many stocks have corrected significantly due to the latest selling spree witnessed on Dalal Street amid the ongoing Russia-Ukraine crisis. Currently, the shares of one of India's leading cement and building products manufacturers, JK Cement are down over 40 per cent from its 52-week high of Rs 3,836.65.
 
The stock touched its 52-week low of Rs 2,135.30 on March 9, 2022. At 14:55 hours, the shares were trading 0.65 per cent lower at Rs 2,281.40 on BSE. The market cap of the firm fell to Rs 17,624.12 crore.
 
However, according to brokerage house Motilal Oswal, JK Cement is likely to continue to gain market share with improved profitability in grey cement backed by strong expansion plans and execution track record.
 
"While the company’s diversification into paint may raise capital allocation concerns, the segment would likely remain a relatively small business for the company and constitute less than 5 per cent of capital employed, revenue and EBITDA over the next five years, in our view. We maintain 'Buy' with an unchanged target price of Rs 3,935/share (14x FY24E EV/E)," it added.
 
It noted that JK Cement is targeting 7-8 per cent paint market share in North / Central regions by gaining market share from unorganised markets, penetrating into tiers-3 and 4 cities and leveraging the strong brand equity and distribution network.
 
The company may commercialise the proposed paint business in Apr’24 and it expects revenue of  Rs 100 crore-150 crore in FY25, inching upto Rs 850 crore in the fifth year after launch. As per the management, JK Cement is unlikely to compete on pricing and is aiming at 15-20 per cent EBITDA margins / RoCE in the medium term.
 
Recently, JK Cement announced that it will make its foray into the paints business. "...we wish to inform you that the board of directors of the company in their board meeting has interalia considered/ approved entering into paint business through a wholly-owned subsidiary, formation of new wholly-owned subsidiary and investment in the said wholly-owned subsidiary," JK Cement said in an exchange filing.
 
The wholly owned subsidiary would undertake manufacturing, selling, trading, importing and exporting and otherwise dealing in all types of paints and allied products and services, it said.
 
JK Cement said its board has approved an investment of up to Rs 600 crore, spread over the first five years, in the subsidiary.
 
The formation of the wholly-owned subsidiary will enable the organisation to focus solely on the paints business, it said.