J K Lakshmi Cement Ltd - 180.00 Rs

JK Lakshmi Cement Ltd (JKLC) was established in 1982 by hiving off the cement division from JK Corporation and is a part of well known HS Singhania group which has diversified interest in tyres, paper, sugar, clinical research, textile, auto ancillary etc. Since then, over the 25 years JKLC has emerged as a leading and reputed cement manufacturer in the northern and western markets. It basically markets three variants of cement under ‘JK LAKSHMI” brand which is a very popular brand today and is renowned for its strength, quality and performance. Besides, company has also forayed into lucrative ready mix concrete (RMC) & plaster of paris (POP) business thru its brand “JK Lakshmi Power Mix” & “JK Lakshmiplast” respectively. Apart from having its own marketing offices, company has a wide network of about 1,500 dealers spread across Rajasthan, Gujarat, Delhi, Haryana, UP, Uttaranchal, Punjab, J&K, HP and Mumbai. Presently, almost 65% of total sales of company accrue from northern region and balance 35% from western region.

JKLC’s state-of-the-art plant located at Jaykaypuram, distt. Sirohi, Rajasthan boast of using latest technology from M/s Blue Circle Industries and modern equipments from M/s Fuller International of USA. To cash on the buoyancy in the cement industry, it has rapidly expanded its capacity to 3.40 million from 2.40 million TPA during last fiscal. With cement demand expected to remain robust in coming years, it is further enhancing its capacity to 5 million TPA by Oct 2008. On the back of continuous & serious efforts by the company, the blended cement now contributes nearly 70% of total sales against 46% earlier. Notably, blended cement has a better margin as the cost of production is low due to mixing of 20% fly ash. But most importantly, company has installed and commissioned two pet coke based captive power plants of 18 MW each in March’07 and July’07 respectively. With this it has become self sufficient in respect of power requirement and will also be able to bring down its power cost considerably to the extent of more than Rs 15 cr per annum. On the other hand, it is betting high on RMC business as it has great potential along with high margins. Currently it is operating 5 RMC plants, but is aggressively expanding to add at least 5 to 6 plants more in near future. Hence, in all it has capex of around Rs 400 cr of which nearly 25% will be funded thru debt and balance thru internal accruals. It will also be getting Rs 35 cr thru conversion of 41 lac warrants allotted to group company @ Rs 97 Rs per share in June’06.

To maintain its growth momentum in future, JKLC intends to set up a Greenfield cement plant near Bhilai, Chhattisgarh with a capacity to produce 2.5 million TPA. For this company has identified couple of limestone mines and is looking to apply for mining lease. Meanwhile, it has replaced its high cost debts by cheaper funds to the extant of Rs 325 cr, which will reduce interest costs going forward and hence company has come out of the Corporate Debt Restructuring (CDR) purview. On the back of terrific nos for Sept qtr, it recorded 50% growth in sales to Rs 534 cr and Net profit increased by 130% to 142 cr for H1FY08. Hence even on a conservative basis, it may clock a turnover of 1100 cr and PAT of 210 cr for FY08 which translates into EPS of Rs 34 on fully diluted equity Rs 61.20 cr. However, the recent undue concession offered by the government for import of cement, including zero percent import duty, removal of countervailing duty and SAD, has put the Indian cement industry to a competitive disadvantage position which was already subjected to high cost of manufacturing vis-a-vis their counterparts in countries like China, Thailand, Indonesia. Despite this, investors are recommended to buy at current levels for a target of Rs 280 (55% return) in a year’s time.

Download Report(PDF)