JK Lakshmi Cement: Regaining strength ::BL

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JK Lakshmi, Capacity expansion to drive growth… :: ICICI Securities, report

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JK Lakshmi Cement: Buy :: Business Line

JK Lakshmi Cement (Buying Range: |127-|120) • Muhurat Picks - 2012 :: ICICI Direct

JK Lakshmi Cement (Buying Range: |127-|120)
• JK Lakshmi Cement is a North India based cement company
having an integrated cement plant with the capacity of 4.2 MTPA
at Sirohi, Rajasthan and 0.55 MTPA each at Kalol (Gujarat) and
Jhajjar (Haryana). JKLC is expanding its cement capacity by
2.7MTPA at Durg, Chhattisgarh over next one or two years
• On account of strong demand growth expectations in northern,
central and western regions, we expect cement volumes to grow
at ~7% CAGR during FY12-14E to 5.6 MT in FY14E from 4.9 MT in
FY12. Also, improvement in utilisation rates, going forward,
would help in sustainable pricing. We expect realisation to grow
~16% YoY in FY13E and ~6% in FY14E. Margins are expected to
improve in FY13E/14E, led by improvement in realisations and
operating leverage benefits
• We remain positive on the stock on account of capacity expansion
led volume growth, improvement in margins and return ratios and
cheap valuations. It is trading at $54/tonne at FY14E capacity of
8.1 MT, which is ~55% discount to the current replacement cost

Buy JK Lakshmi Cement; Target : Rs 74 :: ICICI Securities, (pdf link)

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PDF link for report- click here



H i g h e r   r e a l i s a t i o n   l e a d s   t o   s p u r t   i n   m a r g i n s …
JK Lakshmi Cement reported net sales  of | 439 crore and net profit of
| 49 crore in Q3FY12, which were above our respective estimates of | 416
crore and | 28 crore due to higher-than-expected cement realisation at |
3588/tonne vs. our estimate of |  3498/tonne. Realisation improved
significantly ~23% YoY (~14% QoQ), which helped in a sharp
improvement in operating margin by 1331 bps YoY (954 bps QoQ) to
21.2%. Cement volumes increased during the quarter on a rise in demand
post monsoon. The EBITDA/tonne rose to | 759/tonne in Q3FY12, which
was ahead of our estimate of | 625/tonne. Going forward, we expect
volume growth at ~9% CAGR over FY11-13E to 5.1 MT in FY13E from 4.3
MT in FY11 due to an improvement in utilisation rates. We estimate
EBITDA/tonne of | 630 in FY12E and | 634 in FY13E.
ƒ Net realisation up ~26% YoY, cement volume up ~10% YoY
Blended cement sales volumes increased ~13% YoY (~9% QoQ) to
1.22 million tonnes (MT) as cement demand picked up during the
quarter post monsoons on increased offtake from construction
activities. The cement realisation increased ~23% YoY (~14% QoQ)
to | 3588/tonne due to a rise in cement prices during the quarter
after the significant increase in dispatches.
ƒ EBITDA/tonne increases sharply to | 759/tonne
The EBITDA/tonne has improved significantly to | 759/tonne on a
rise in realisation, which negated the impact of increased total cost,
which increased ~5% YoY (~2% QoQ) to | 2829/tonne.

V a l u a t i o n
At the CMP of | 65, the stock is trading at 6.4x and 5.5x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 4.4x
and 5.3x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $51 and $67 its FY12E and FY13E capacities of 5.4
MT. We have valued the FY13E capacity of 5.4 MT at $70/tonne. We
maintain our BUY rating with a revised target price of | 74/share

JK Lakshmi Cement:: 2QFY2012 Result Update: Angel Broking,

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JK Lakshmi Cements (JKLC) reported a 14.1% yoy improvement in its bottom line
during 2QFY2012, which was below our estimate due to lower-than-estimated
realization. Although, realization grew by 11.7% on a yoy basis, sequentially it
was down by 10.6%. EBITDA per tonne stood at `365, up 24.6% yoy (down
47.8% qoq). We maintain our Buy view on the stock.
OPM at 11.6% up 123bp yoy: During 2QFY2012, JKLC registered top-line
growth of 33.2% yoy to `354cr. The company’s dispatches rose by healthy
19.3% yoy to 1.13mn tonnes, while realization improved by 11.7% yoy to
`3,142/tonne. Operating margin improved by 123bp yoy to 11.6%, aided by
better realization, although the company faced margin pressures due to
increased freight and other costs. JKLC’s operating profit rose by 48.9% yoy
during the quarter. However, bottom line rose by lower 14.1% yoy to `6.5cr.
Lower growth in the bottom line was on account of higher depreciation (up
37.7% yoy), interest (up 79.6% yoy) and tax expenses (`1.4cr in 2QFY2012
vs. negative tax of 1.7cr in 2QFY2011).
Outlook and valuation: We expect JKLC to post a decent 12.9% CAGR in its top
line over FY2011-13E, aided by a 6.5% CAGR in dispatches over the period.
At the CMP, the stock is trading cheaply at EV/EBITDA of 2.6x and EV/tonne of
US$32 based on FY2013E. We have valued the stock at EV/EBITDA of 3x on
FY2013E to arrive at a target price of `52. We maintain our Buy recommendation
on the stock primarily due to its cheap valuations.

Buy JK Lakshmi Cement; Target :Rs 61 ::ICICI Securities,

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L o w e r   r e a l i s a t i o n   h u r ts  m a r g i n s …
JK Lakshmi Cement reported net sales of | 354 crore (up ~33% YoY and
down ~10% QoQ) and net profit of | 6.5 crore (up ~13% YoY and down
~71% QoQ). These were above our respective estimates of | 320 crore
and net loss of | 13 crore on account of higher-than-expected cement
volume  at  1.13  MT  against  our  estimate  of  0.96  MT  and  higher-thanexpected realisation at | 3148/tonne against our estimate of | 3023/tonne.
The EBITDA/tonne improved ~25% YoY to | 366/tonne in Q2FY12 but
declined  ~44%  QoQ.  We  expect  volume  growth  at  ~8%  CAGR  over
FY11-13E  with  ~5  MT  in  FY13E  from  4.3  MT  in  FY11  on  account  of  an
improvement in utilisation rates. We estimate an EBITDA/tonne of | 546 in
FY12E and | 588 in FY13E against | 451 in FY11.
ƒ Net realisation down ~9% QoQ, volume up ~19% YoY (flat QoQ)
Blended cement sales volumes increased ~19% YoY to 1.13 MT but
remained flat QoQ. The cement  realisation increased ~12% YoY
(declined ~9% QoQ) to | 3148/tonne due to a correction in cement
prices across its selling markets during the quarter.
ƒ EBITDA declines ~44% QoQ to | 366/tonne on lower realisation
The EBITDA/tonne has declined ~44% YoY to | 366 on the back of a
decline in realisation, which negated the impact of a decline in the
power & fuel, freight and other costs. On a YoY basis, the
EBITDA/tonne has improved ~25% on higher realisation.

V a l u a t i o n
At the CMP of | 43, the stock is trading at 6.8x and 5.6x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 5.8x
and 6.6x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $58 and $52 its FY12E and FY13E capacities of 5.4
MT and 8.1 MT, respectively. We have valued the stock at $60/tonne its
FY13E capacity of 8.1 MT, which is ~53% discount to the current
replacement cost of $130/tonne. We have maintained our BUY rating on
the stock with a target price of | 61/share.

Buy JK Lakshmi Cement; Target : Rs 61 ::ICICI Securities

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H i g h e r   r e a l i s a t i o  n   d r i v e s  ma r g i n s…
JK Lakshmi Cement reported net sales of | 392 crore (up ~21% YoY and
down ~5% QoQ) and net profit of | 23 crore (up 35% YoY and down
~29% QoQ). These were above our respective estimates of | 355 crore
and | 19 crore on account of higher-than-expected realisation, which
increased ~5% QoQ to | 3473 per tonne against our expectation of |
3148 per tonne. The EBITDA per tonne improved to | 654/tonne in
Q1FY12 as against | 483/tonne in  Q4FY11 due to an increase in
realisations. The company plans to increase its capacity to 8.1 MTPA by
end of FY13E through setting up a 2.7 MTPA greenfield plant at Durg and
0.55  MT  of  grinding  units.  We  expect  volume  growth  of  6%  CAGR  over
FY11-13E with 4.9 MT in FY13E from 4.3 MT in FY11 on account of an
improvement in utilisation rates. We estimate an EBITDA per tonne of |
577 in FY12E and | 598 in FY13E against | 451 in FY11.
ƒ Sales volume up ~10% YoY, realisation up ~10% YoY
Cement sales volumes increased ~10% YoY to 1.13 MT but
declined ~10% QoQ. Realisations increased ~10% YoY (~5% QoQ)
to | 3473 per tonne due to an increase in prices across its markets.
ƒ EBITDA/tonne improves to | 654 (up ~18% YoY, ~10% QoQ)
The EBITDA/tonne has improved ~18% YoY to | 654 on the back of
an increase in realisation, which negated the impact of a rise in the
total cost per tonne. Sequentially, the EBITDA/tonne has improved
~10%.
V a l u a t i o n
At the CMP of | 46, the stock is trading at 6.4x and 6.3x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 5.8x
and 6.9x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $59 and $53 its FY12E and FY13E capacities of 5.4
MT and 8.1 MT, respectively. We have valued the stock at $60/tonne at its
FY13E capacity of 8.1 MT.  We have maintained our  BUY rating on the
stock with a target price of | 61 per share.

JK Lakshmi Cement: Buy Target : 56 : ICICI Securities

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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.

Buy JK Lakshmi Cement – 3QFY2011 Result Update - Angel Broking

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 JK Lakshmi Cement – 3QFY2011 Result Update

Angel Broking maintains a Buy on JK Lakshmi Cement with a Target Price of Rs. 80.

For 3QFY2011, JK Lakshmi Cement (JKLC) posted a substantial 1,732bp yoy
decline in operating margin to 7.9% due to the fall in realisations and a steep
66% yoy increase in per tonne power and fuel costs. Going ahead, we expect
JKLC to face relatively less pricing pressures owing to pick-up in demand in the
northern region. JKLC is currently trading at US $32/tonne based on FY2012E
capacity, which is lower than its peers and well below its replacement cost. Hence,
we maintain a Buy on the stock.
PAT declines 87.8% yoy on lower realisations, higher power cost:
JKLC posted 10.7% yoy decline in top-line to `315cr (`353cr) primarily on
account of the substantial fall in realisations on a yoy basis. However, qoq
top-line grew by 18.6%. OPM for the quarter plunged by a substantial 1,732bp
yoy to 7.9% (25%) on account of the fall in realisations and significant increase in
the power and fuel costs. Thus, bottom-line came in at `4.6cr (`46cr), down
90.1% yoy. The decline in bottom-line was however, restricted by the lower tax
expense due to write-backs.
Outlook and valuation: We expect JKLC to post a modest 2.3% CAGR in top-line
over FY2010-12, aided by a 6% CAGR in dispatches over the period. Going
ahead, we expect realisations to improve on the back of better demand from the
housing and real estate sectors. JKLC is currently trading at US $32/tonne on
FY2012E capacity, 57% below its replacement cost. We have valued JKLC at
EV/tonne of US $50 to arrive at a fair value of `80, which is still at a discount to
its replacement cost. We maintain a Buy on the stock, with a revised Target Price
of `80 (`92).

Operational highlights

In 3QFY2011, JKLC’s per tonne cement realisations declined by 3.5% yoy to

`3,186. Dispatches during the quarter also fell by 7.5% yoy to 0.99mn tonnes, as

demand failed to pick up in the company’s primary markets in the northern and

western regions. The low demand in the regions was due to the poor off-take from

the real estate and infrastructure sectors. The company’s per tonne power and fuel

costs increased by 66.4% yoy to `1,059 during the quarter. Per tonne freight cost

also increased by 23.4% yoy to `683. Operating profit per tonne stood at `251

during the quarter, down 76.5% yoy.

Investment arguments
Activity concentration in the northern region to protect margins: JKLC derives more
than 50% of its revenue from the northern region. Although, this region is currently
facing low demand, the long-term demand outlook for the northern region is good
due to huge infrastructure and real estate projects that are likely to come up in the
region. Further, the region is not expected to witness major capacity addition over
the next two years. Thus, we expect players in the region to regain pricing power,
with the improvement in demand situation. Hence, we expect JKLC to gain out of
the positive demand-supply dynamics in the region.
Rising captive power usage to improve profitability: JKLC is planning to increase its
total captive power capacity to 87MW from 36MW by FY2012E, which will be
sufficient to meet nearly 90% of its power requirement on the expanded capacity of
8.1mtpa, thus improving its profitability substantially. Moreover, JKLC has tied up
with VS Lignite, a KSK Group company, for the purchase of 21MW power every
year for the next 20 years at a price of `3.2/unit, which is close to the company’s
captive power cost.
Strong balance sheet: JKLC’s debt currently stands at ~ `1,050cr, of which
~`100cr is on account of deferred sales tax (interest free). The company’s cash
and liquid investments stand at ~`560cr. Thus, JKLC’s balance sheet is well
placed, with net debt/equity of 0.35x, which would enable smooth execution of its
expansion plans. The company is currently setting up a 2.7mtpa green-field plant
at Chattisgarh, which is expected to be operational by FY2013.



Outlook and valuation
We expect JKLC to post a modest 2.3% CAGR in top-line over FY2010-12, aided
by a 6% CAGR in dispatches over the period. Going ahead, we expect realisations
to improve on the back of better demand from the housing and real estate sectors.
JKLC is currently trading at US $32/tonne on FY2012E capacity, 50% below its
replacement cost. Even on relative terms, the company is trading at a huge ~57%
discount v/s the other mid-cap players. We have valued JKLC at an EV/tonne of
US $50 on FY2012 estimates to arrive at a fair value of `80, implying 53% upside
from current levels and it is still at a discount to its replacement cost. Hence, we
maintain a Buy on the stock, with a revised Target Price of `80 (`92).

JK Lakshmi Cement:Paving recovery path: Elara

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Paving recovery path
Beat street estimates hollow by sustaining net profit
Revenues of JK Lakshmi Cement (JKL) were in line with our
expectations (INR2,660 mn vs our estimates of INR2,656mn). However,
net profit was much above ours and street estimates due to higher
than expected other income and EBITDA margins. The company
reported a net profit of INR58mn as compared to our estimates of a
net loss of INR106mn.

JK Lakshmi Cement – 2QFY2011 Result Update Angel Broking

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 JK Lakshmi Cement – 2QFY2011 Result Update

Angel Broking maintains a Buy on JK Lakshmi Cement  with a Target Price of Rs92.

For 2QFY2011, JK Lakshmi (JKLC) posted a 2,314bp yoy decline in operating
margin to 10.4% due to a fall in realisations and a steep 62% yoy increase in
per tonne power and fuel costs, due to higher coal prices. Going ahead, we
expect JKLC to face relatively less pricing pressure post the recent price hike
and the pick-up in demand post monsoons. JKLC is currently trading at
US $39/tonne based on FY2012E capacity, at a valuation lower than its peers
and well below its replacement cost. Hence, we maintain Buy on the stock.

JK Lakshmi Limited- Cementing its true place: Elara

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Cementing its true place
Capacity to go up by 67%, debottlenecking to boost volume
JK Lakshmi Limited (JKL) is in the process of increasing its cement
capacity by 67% from existing 4.75mn tonnes to 7.95mn tonnes by
end of FY13 through a new greenfield plant and debottlenecking of
the existing plant. The debottlenecking would enhance cement
volume of JKL at a CAGR of ~1% (FY10-12) while the benefit from the
greenfield plant is expected to be visible only from end of FY13.