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JK Lakshmi Cement 2QFY2013 performance highlights and results update

Contributed by Angel Broking

JK Lakshmi Cement (JKLC)'s net profit in 2QFY2013 grew by 686% yoy driven by a strong 29.2% yoy improvement in blended realization and a reasonably good 7-8% growth in volumes. The volume growth on a yoy basis was aided by additional volumes from the companyRs.s new split-grinding capacity in Jhajjar, which was commissioned in April 2012.

OPM at 23.0%, up 1,136bp yoy: During 2QFY2013, JKLC registered a robust top-line growth of 38.8% yoy to ?491cr. Volumes stood at ~1.21mn tonne, up 7-8% on a yoy basis. Blended realization grew by 29.2% yoy and stood at Rs.4,061/tonne. The company posted a steep 1,136bp yoy improvement in its OPM to 23.0% led by a better realization. The realization was higher by 5.5% even on a qoq basis as delayed monsoon resulted in cement prices going up in the companyRs.s key markets in July, before witnessing a decline in August and September. However, the average realization was still higher on a qoq basis. Further, there was an improvement in the sales mix as the proportion of trade segment in the overall sales volume went up resulting in higher realization.

Outlook and valuation: Going ahead, we expect JKLC to post a 28% CAGR in its bottom-line over FY2012-14E, due to its presence in high growth regions. At the current market price, the stock is trading cheaply at an EV/tonne of US$55/tonne (on FY2014E capacity), which is a steep discount to replacement cost. We recommend a Buy on the stock with a target price of Rs.143.