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Recommendations India

JK Lakshmi Cement 3QFY2014 performance highlights and results update

February 12, 2014, Wednesday, 07:52 GMT | 02:52 EST | 12:22 IST | 14:52 SGT
Contributed by Angel Broking


JK Lakshmi Cement (JKLC) posted a 66% yoy fall in its net profit for 3QFY2014, impacted by steep fall in realization. However, the company posted a 7% yoy growth in its sales volume despite weak demand in the company’s key markets of Gujarat and North India. Thus the EBITDA/tonne was down by 53.4% yoy to Rs.576.
 
OPM at 12.6%, down 725bp yoy: For 3QFY2014 JKLC posted a 1.8 yoy increase in its top-line to Rs.503cr, which was ahead of our estimates. While volumes rose by 13% yoy to 1.42mn tonne, realization was down by 9.9% yoy, resulting in a marginal growth on the top-line front. The Management said that the volume growth was flat in its key markets, thereby indicating a gain in market share by JKLC from the major players in those markets. The OPM for the quarter fell steeply by 725bp yoy on account of lower realization. However, the company posted a 1.7% yoy reduction in operating cost/tonne due to better fuel efficiency. While power consumption per tonne of cement reduced to 73kwh from 75kwh, fuel consumption per kg of clinker stood at 725K.cal vs 738K.cal in 3QFY2013.
 
Outlook and valuation: Going ahead, we expect JKLC’s bottom-line to de-grow at a CAGR of 25% over FY2013-15E, due to weak demand and poor pricing scenario. However, we maintain our Buy rating on the stock with a target price of Rs.79 considering the attractive valuations on EV/tonne (US$42 on FY2015E capacity) basis.