MOSL: J K LAKSHMI CEMENT (Buy)-Volumes disappointment due to lower clinker sales
J K Lakshmi Cement: Volumes disappointment due to lower clinker sales
(JKLC IN, Mkt Cap USD0.6b, CMP INR330, TP INR384, 16% Upside, Buy)
- Weakness in north impacts volumes: Volumes stood at 2.29mt (+0% YoY, +3% QoQ), below our estimate of 2.33mt due to lower clinker sales in north markets. Realizations were at INR4,032/t (+2.3% YoY, flat QoQ) v/s our estimate of INR4,072, as healthy pricing in east was offset by lower realizations in north. Revenue grew 2.5% YoY (+3% QoQ) to INR9.23b (est. of INR9.5b).
- Profitability impacted by cost push: Cost/t rose 6% YoY (+2% QoQ) to INR3,623 due to higher freight and power & fuel cost. Thus, EBITDA/ton of INR410 (-22% YoY, -10% QoQ) was lower than our estimate of INR466. EBITDA declined 22% YoY (-7% QoQ) to INR939m (est. of INR1.08b; margin at 10.2%, -3.19pp YoY, -1.13pp QoQ). Tax rate was at 9% in 1QFY19 v/s 24% in 1QFY18, providing some support to PAT (down 51% YoY to INR137m v/s est. of INR187m).
- Management commentary: (1) Power consumption improved YoY to 67kwh/t from 72kwh. (2) Thermal power plant and Odisha GU are likely to commission by 3QFY19. (3) Cement volumes increased 4% YoY, while clinker sales declined. (4) Lead distance reduced by 20km in 1QFY19. (5) Trade mix was 54%. (6) Udaipur Cement Works operated at 80% utilization. (7) Capex of INR1b planned each in FY19 and FY20. (8) PPC mix at 65% for 1QFY19.
JK Lakshmi Cement is engaged in the manufacture of paper, cement, magnetic tape, polyester staple fiber and polyester filament yarn. Through its subsidiaries, Co. is also engaged in the manufacture of iron and steel and the provision of financial and investment services. Co. exports paper to Malaysia, Singapore, Sri Lanka, Bangladesh, Africa and the Middle East. Co. manufactures JK Laser, copier paper for laser printer, Chancellor Bond, JK Compac for computer stationery, Grade 43 cement and paper for packaging and books. Co. also exports audio tapes and is a supplier to recording companies. In addition, Co. exports fibers to Germany, Belgium, Egypt, Bangladesh and Russia.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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