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August 7, 2013
JK Lakshmi Cement
Performance Highlights
Quarterly results (Standalone)
Y/E March (` cr) Net revenue Operating profit OPM (%) Net profit 1QFY2014 457 70 15.4 16 4QFY2013 536 95 17.7 49 % chg qoq (14.7) (26.1) (237)bp (68.1) 1QFY2013 534 122 22.9 51 % chg yoy (14.4) (42.6) (754)bp (69.0)
BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Cement 631 787 1.0 172/49 22,701 5 18,733 5,542 JKLC.BO JKLC@IN
`54 `79
12 Months
JK Lakshmi Cement (JKLC) posted a 69% yoy fall in its net profit for 1QFY2014, impacted by steep decline in sale volumes and fall in realization. Profitability was also impacted due to a 7% yoy increase in operating cost/tonne. Thus the EBITDA/tonne was down by 34.6% yoy to `576. OPM at 15.4%, down 754bp yoy: For 1QFY2014 JK Lakshmi Cement posted a 14.4% yoy decline in top-line to `457cr, which was below our estimates. Volumes fell by a steep 12.2% yoy as the companys key markets in North India and Gujarat witnessed a 5% yoy de-growth in demand. The Management indicated that of all the markets the company operates in, only Rajasthan posted a demand growth of ~3-4% yoy. Poor demand resulted in a weak pricing scenario resulting in a 2.5% yoy de-growth in realization. The OPM for the quarter fell steeply by 754bp yoy on account of lower realization and increase in costs. The companys operating costs per tonne rose by 7% yoy, impacted largely by higher freight costs and other expenses. Freight costs/tonne rose by 12.4% yoy on account of increase in both the railway freight fare and road transportation costs due to increase in diesel prices. Despite the fall in pet coke prices, power and fuel costs rose by 1.1% due to higher clinker production. The bottom-line fell by 69% yoy on account of poor operational performance. Outlook and valuation: Going ahead, we expect JKLC to post a 6% CAGR in its bottom-line over FY2013-15. At the current market price, the stock is trading at an EV/tonne of US$40 (on FY2015E capacity). We maintain our Buy rating on the stock with a target price of `79 considering the attractive valuations.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 46.0 11.8 10.1 32.1
3m (4.8) (47.4)
1yr 8.9
3yr 3.2
(43.3) (10.1)
FY2013
2,055 19.6 192 29.7 16.3 20.9 3.3 0.5 15.8 10.9 0.5 25 2.3
FY2014E
2,235 8.8 177 (8.1) 15.0 19.4 3.6 0.4 13.2 9.1 0.4 22 2.1
FY2015E
2,684 20.1 216 22.5 18.4 0.0 2.9 0.4 14.3 10.0 0.9 40 4.2
V Srinivasan
022-39357800 v.srinivasan@angelbroking.com
1QFY2014 457 101 22.2 103 22.6 30 6.6 102 22.4 49 10.8 387 70 15.4 20 36 3 18 18 2 11.1 16 3.5 1.3
4QFY2013 536 156 29.1 88 16.5 26 4.9 118 22.1 52 9.7 441 95 17.7 18 49 23 51 51 1 2.7 49 9.2 4.2
% Chg (14.7) (35.0) 17.0 14.1 (13.3) (4.4) (12.3) (26.1) (237)bp 9.6 (28.2) (87) (65.1) (65.1)
1QFY2013 534 113 21.2 116 21.8 28 5.2 104 19.4 51 9.5 412 122 22.9 21 33 4.8 74 74 23 30.9
% Chg (14.4) (10.4) (11.2) 8.0 (1.3) (2.0) (6.1) (42.6) (754)bp (2.8) 8.1 (37.5) (75.9) (75.9)
FY2013 2,055 486 23.7 406 19.8 113 5.5 422 20.5 199 9.7 1,626.0 429 20.9 84 149 55 252 16 236 59.6 25.3
FY2012 1,718 368 21.4 414 24.1 98 5.7 331 19.3 172 10.0 1,383 335 19.5 87 130 63 181 39 142 34 23.9 148 8.6 12.1
% Chg 19.6 32.3 (1.8) 15.1 27.2 15.9 17.6 28.0 136bp (4.4) 14.8 (12.5) 38.9 65.7 75 30.5
(68.1)
51 9.5 4.2
(69.0)
August 7, 2013
Performance highlights
Top-line down 14.4% yoy
JKLC posted a 14.4% yoy decline in top-line to `457cr, which was below our estimates. Volumes fell by a steep 12.2% yoy as the companys key markets in North India and Gujarat witnessed a 5% yoy de-growth in demand. The Management indicated that of all the markets the company operates in, only Rajasthan posted a demand growth of ~3-4% yoy. Poor demand resulted in a weak pricing scenario resulting in a 2.5% yoy de-growth in realization.
Source: Company, Angel Research; Note Incl. Raw materials and purchase of stock in trade
August 7, 2013
August 7, 2013
Investment rationale
Presence in high growth region: JKLC has 60% and 40% exposure to the northern and western regions of the country, while it has no presence in the south. High captive power usage to result in healthy profitability: JKLC has a power purchase tie-up with VS Lignite for 21MW power for the next 20 years at `3.2/unit (closer to its captive power cost) in addition to its current total captive power capacity of 66MW. Thus, effectively the company has access to 87MW of cheaper power, which is more than sufficient for its current capacity.
1,361 79 -
17.0 47.4 -
Source: Company, Angel Research; Note: *Y/E December; #Y/E June ^ Computed on TTM basis
August 7, 2013
Company Background
JK Lakshmi Cement (JKLC) is a mid-sized cement company with a current total capacity of 5.3mtpa spread across Rajasthan (4.2mtpa), Gujarat (0.5mtpa) and Haryana (0.55mtpa). The company also has plans to set up a 2.7mtpa greenfield plant at Durg in Chhattisgarh by FY2015. JKLC is refurbishing the defunct plant of Udaipur Cement Works. The refurbished cement plant, with a capacity of 1.4mtpa, is expected to be operational by FY2015.
FY11
1,319 (11.5) 1,136 204 392 81 459 183 (56.9) 13.9 85 99 (71.4) 7.5 60 21 26.8 60 (81.6) (19) 79 20 25.0 59 40 (82.9) 3.0 3.3 3.3 (82.9)
FY12
1,718 30.3 1,390 368 414 98 511 328 79.1 19.1 130 198 101.1 11.5 80 63 44.4 182 204.5 39 143 34 23.8 109 148 269.0 8.6 12.1 12.1 269.0
FY13
2,055 19.6 1,626 486 406 113 620 429 30.7 20.9 149 280 41.1 13.6 84 55 23.6 252 38.3 16 235 60 25.3 176 192 29.7 9.3 16.3 16.3 34.9
FY14E
2,235 8.8 1,802 540 453 125 684 433 1.1 19.4 163 270 (3.4) 12.1 100 70 29.0 240 (4.8) 240 63 26.3 177 177 (8.1) 7.9 15.0 15.0 (8.1)
FY15E
2,684 20.1 2,109 617 527 137 828 574 32.6 21.4 235 340 25.6 12.7 116 70 23.7 293 22.5 293 77 26.3 216 216 22.5 8.1 18.4 18.4 22.5
August 7, 2013
FY10
FY11
FY12
FY13
FY14E
FY15E
August 7, 2013
FY10
331 80 (45) 35 90 241 (228) (392) 35 (585)
FY11
79 85 (12) 21 20 111 (274) (47) 21 (300)
FY12
143 130 17 63 34 193 (385) 74 63 (247)
FY13
235 149 31 55 60 301 (622) 44 55 (523) (97) 273 18 12 146 (76) 89 13
FY14E
240 163 (23) 70 63 247 (500) 70 (430) 270 18 252 69 13 81
FY15E
293 235 (22) 70 77 360 (700) 70 (630) 250 18 232 (39) 81 43
August 7, 2013
FY10
FY11
FY12
F13
FY14E
FY15E
August 7, 2013
E-mail: research@angelbroking.com
Website: www.angelbroking.com
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
JK Lakshmi Cement No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
August 7, 2013
10