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JK Lakshmi has reported net profit of | 4.6 crore (down 88% YoY and
20% QoQ) in Q3FY11, lower than our estimate of | 5.2 crore on account
of lower than expected operating margin and higher than expected
depreciation and interest costs. Net sales declined ~11% YoY to | 315.3
crore on lower volume and realisations. However, on a sequential basis,
it increased ~19% on increase in volume and realisation. The EBITDA
margin has declined by 1572 bps YoY (254 bps QoQ) to 7.9% on account
of an increase in input costs. EBITDA per tonne declined ~70% YoY
(22% QoQ) to | 229 per tonne (our estimate: | 293 per tonne). During
the quarter, the company has started procuring low cost power from
KSK Energy, which resulted in savings in power and fuel cost. Coupled
with expectations of an increase in cement realisations in FY12E, the
additional 30 MW CPP, which is likely to be commissioned in Q1FY12E,
would help the company to improve its margins.
ƒ Sales volume increases ~14% QoQ, realisation up ~4% QoQ
Cement sales volumes have increased ~14% QoQ to 1.08 MTPA.
However, it was down ~7% YoY due to muted demand growth. Net
realisation has improved ~4% QoQ to | 2920 per tonne on the back
of an increase in cement prices in western region during the quarter.
ƒ EBITDA/tonne declines ~70% YoY (down 22% QoQ)
The company reported EBITDA of | 229 per tonne, which declined
~70% YoY due to an increase in total expenditure by ~18% YoY
coupled with a decline in realisation. Sequentially, EBITDA per tonne
has declined ~22% despite an improvement in realisation as its
impact was negated by ~7% QoQ increase in total cost per tonne.
Valuation
At the CMP of | 49, the stock is trading at 14.4x and 7.3x its FY11E and
FY12E earnings, respectively. It is trading at an EV/EBITDA of 6.2x and
5.3x FY11E and FY12E EBITDA, respectively. On an EV/tonne basis, the
stock is trading at $44 and $49 its FY11E and FY12E capacities,
respectively. We have valued it at $54 per tonne (57% discount to
replacement cost of $125 per tonne) at its FY12E capacity of 5.4 MTPA.
We are revising our target price on the stock to | 56 with a BUY rating.
Net sales increases ~19% QoQ on higher volume and realisation
Net sales have declined ~11% YoY to | 315.3 crore as the sales volume
declined ~7% YoY to 1.08 MTPA coupled with a drop in net realisation by
~4% YoY to | 2920 per tonne. However, on a QoQ basis, net sales have
increased ~19% on account of a ~14% increase in sales volume and
~4% improvement in realisation. Sequentially, the realisation for the
company improved on account of an increase in cement prices during the
quarter in the western region.
EBITDA per tonne declines ~70% YoY and ~22% QoQ on higher costs
During the quarter, the total cost has increased ~18% YoY and ~7% QoQ
to | 2690 per tonne. EBITDA has declined 70% YoY and ~22% QoQ to |
229 per tonne. The operating margin has declined by 1572 bps YoY and
254 bps QoQ to 7.9% as against 23.6% in Q3FY10 and 10.4% in Q2FY11.
The raw material cost has increased ~12% YoY and 2% QoQ to | 477 per
tonne on account of an increase in cost of basic raw materials like fly ash
and gypsum. Freight cost has increased ~6% YoY and ~4% QoQ to |
626 per tonne on the back of an increase in railway freight charges. The
power & fuel cost has increased ~46% YoY to | 971 per tonne on account
of an increase in petcoke prices. However, the cost has declined ~4%
QoQ. The employee cost has declined 5% YoY and ~19% QoQ to | 157
per tonne on account of reduction in managerial remunerations. The
other expenditure has increased ~14% YoY and ~24% QoQ to | 537 per
tonne due to increase in advertisement and sales promotion costs.
Net profit declines ~88% YoY and ~20% QoQ
The reported net profit has declined ~88% YoY and ~20% QoQ to | 4.6
crore, impacted by a decline in the operating margin. Also, an increase in
depreciation and interest cost has eroded the bottomline margin.
Depreciation cost has increased ~20% YoY and ~14% QoQ to | 21.3
crore mainly due to purchase of an aircraft. The interest cost has
increased ~159% YoY and ~12% QoQ to | 12.6 crore.
Capex plan
The company is setting up 30 MW captive power plants. Of these, 12 MW
is a waste heat recovery plant while 18 MW is a thermal-based plant. Both
these plants are expected to be completed by Q4FY11. This would take
the captive power capacity to 66 MW. The company is in the process of
commissioning a 0.55 MTPA split grinding unit, which is expected to get
operational by the end of Q3FY12.
Also, the company is setting up a 2.7 MTPA clinker unit at Durg,
Chhattisgarh with a capex of | 1200 crore. This is expected to come on
stream by Q3FY13.
Valuations
At the CMP of | 49, the stock is trading at 14.4x and 7.3x its FY11E and
FY12E earnings, respectively. It is trading at an EV/EBITDA of 6.2x and
5.3x FY11E and FY12E EBITDA, respectively. On an EV/tonne basis, the
stock is trading at $44 and $49 its FY11E and FY12E capacities,
respectively. We have valued the stock at $54 per tonne (57% discount to
replacement cost of $125 per tonne) at its FY12E capacity of 5.4 MTPA.
We are revising our target price on the stock to | 56 per share with BUY
rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
JK Lakshmi has reported net profit of | 4.6 crore (down 88% YoY and
20% QoQ) in Q3FY11, lower than our estimate of | 5.2 crore on account
of lower than expected operating margin and higher than expected
depreciation and interest costs. Net sales declined ~11% YoY to | 315.3
crore on lower volume and realisations. However, on a sequential basis,
it increased ~19% on increase in volume and realisation. The EBITDA
margin has declined by 1572 bps YoY (254 bps QoQ) to 7.9% on account
of an increase in input costs. EBITDA per tonne declined ~70% YoY
(22% QoQ) to | 229 per tonne (our estimate: | 293 per tonne). During
the quarter, the company has started procuring low cost power from
KSK Energy, which resulted in savings in power and fuel cost. Coupled
with expectations of an increase in cement realisations in FY12E, the
additional 30 MW CPP, which is likely to be commissioned in Q1FY12E,
would help the company to improve its margins.
ƒ Sales volume increases ~14% QoQ, realisation up ~4% QoQ
Cement sales volumes have increased ~14% QoQ to 1.08 MTPA.
However, it was down ~7% YoY due to muted demand growth. Net
realisation has improved ~4% QoQ to | 2920 per tonne on the back
of an increase in cement prices in western region during the quarter.
ƒ EBITDA/tonne declines ~70% YoY (down 22% QoQ)
The company reported EBITDA of | 229 per tonne, which declined
~70% YoY due to an increase in total expenditure by ~18% YoY
coupled with a decline in realisation. Sequentially, EBITDA per tonne
has declined ~22% despite an improvement in realisation as its
impact was negated by ~7% QoQ increase in total cost per tonne.
Valuation
At the CMP of | 49, the stock is trading at 14.4x and 7.3x its FY11E and
FY12E earnings, respectively. It is trading at an EV/EBITDA of 6.2x and
5.3x FY11E and FY12E EBITDA, respectively. On an EV/tonne basis, the
stock is trading at $44 and $49 its FY11E and FY12E capacities,
respectively. We have valued it at $54 per tonne (57% discount to
replacement cost of $125 per tonne) at its FY12E capacity of 5.4 MTPA.
We are revising our target price on the stock to | 56 with a BUY rating.
Net sales increases ~19% QoQ on higher volume and realisation
Net sales have declined ~11% YoY to | 315.3 crore as the sales volume
declined ~7% YoY to 1.08 MTPA coupled with a drop in net realisation by
~4% YoY to | 2920 per tonne. However, on a QoQ basis, net sales have
increased ~19% on account of a ~14% increase in sales volume and
~4% improvement in realisation. Sequentially, the realisation for the
company improved on account of an increase in cement prices during the
quarter in the western region.
EBITDA per tonne declines ~70% YoY and ~22% QoQ on higher costs
During the quarter, the total cost has increased ~18% YoY and ~7% QoQ
to | 2690 per tonne. EBITDA has declined 70% YoY and ~22% QoQ to |
229 per tonne. The operating margin has declined by 1572 bps YoY and
254 bps QoQ to 7.9% as against 23.6% in Q3FY10 and 10.4% in Q2FY11.
The raw material cost has increased ~12% YoY and 2% QoQ to | 477 per
tonne on account of an increase in cost of basic raw materials like fly ash
and gypsum. Freight cost has increased ~6% YoY and ~4% QoQ to |
626 per tonne on the back of an increase in railway freight charges. The
power & fuel cost has increased ~46% YoY to | 971 per tonne on account
of an increase in petcoke prices. However, the cost has declined ~4%
QoQ. The employee cost has declined 5% YoY and ~19% QoQ to | 157
per tonne on account of reduction in managerial remunerations. The
other expenditure has increased ~14% YoY and ~24% QoQ to | 537 per
tonne due to increase in advertisement and sales promotion costs.
Net profit declines ~88% YoY and ~20% QoQ
The reported net profit has declined ~88% YoY and ~20% QoQ to | 4.6
crore, impacted by a decline in the operating margin. Also, an increase in
depreciation and interest cost has eroded the bottomline margin.
Depreciation cost has increased ~20% YoY and ~14% QoQ to | 21.3
crore mainly due to purchase of an aircraft. The interest cost has
increased ~159% YoY and ~12% QoQ to | 12.6 crore.
Capex plan
The company is setting up 30 MW captive power plants. Of these, 12 MW
is a waste heat recovery plant while 18 MW is a thermal-based plant. Both
these plants are expected to be completed by Q4FY11. This would take
the captive power capacity to 66 MW. The company is in the process of
commissioning a 0.55 MTPA split grinding unit, which is expected to get
operational by the end of Q3FY12.
Also, the company is setting up a 2.7 MTPA clinker unit at Durg,
Chhattisgarh with a capex of | 1200 crore. This is expected to come on
stream by Q3FY13.
Valuations
At the CMP of | 49, the stock is trading at 14.4x and 7.3x its FY11E and
FY12E earnings, respectively. It is trading at an EV/EBITDA of 6.2x and
5.3x FY11E and FY12E EBITDA, respectively. On an EV/tonne basis, the
stock is trading at $44 and $49 its FY11E and FY12E capacities,
respectively. We have valued the stock at $54 per tonne (57% discount to
replacement cost of $125 per tonne) at its FY12E capacity of 5.4 MTPA.
We are revising our target price on the stock to | 56 per share with BUY
rating.
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