MOSL: J K LAKSHMI CEMENT (Buy)-EBITDA beat led by higher-than-estimated realization
​J K Lakshmi Cement: EBITDA beat led by higher-than-estimated realization
(JKLC IN, Mkt Cap USD0.8b, CMP INR439, TP INR512, 16% Upside, Buy)
- Healthy realization in Gujarat market: JKLC’s volume increased 10% YoY (-17% QoQ) to 1.89mt (est. of 1.92mt), as capacity expansion led to strong volume growth in east. Realization rose 8% YoY (+4% QoQ) to INR4,109 (est. of INR3,814), led by healthy pricing in Gujarat markets and supported by a change in commercial terms. Revenue grew 18% YoY (-14% QoQ) to INR7.7b (est. of INR7.3b), while EBITDA increased 2% YoY (-21% QoQ) to INR954m (margin: 12.3%; -2pp YoY, -1pp QoQ) v/s our estimate of INR688m, translating into EBITDA/ton of INR505 (-INR40/t YoY, -INR22/t QoQ; estimates of INR358/t). Net profit stood at INR132m (-47% YoY) v/s estimate of a loss of INR107m due to higher-than-estimated EBITDA.
- Cost push dents profitability: Unitary cost per tonne for JKLC increased 10% YoY (+5% QoQ) due to higher petcoke prices. Freight cost/t increased 16% QoQ to INR1,082 due to a change in commercial terms. The increase in road freight rates was partially negated by a decline in lead distance.
- Management commentary: 1) JKLC’s north volume rose 6% YoY to 1.45mt, while east volume was up 27% YoY to 0.445mt in 2QFY18. 2) EBITDA/t differential between north and east is around INR400/t (INR300/t due to cost differential and realization difference of INR100/t). 3) Commissioning of WHRS and thermal power plant in east should reduce cost by INR250/t for the region. 4) OPC is 41%, PPC is 55% and slag is 5% of overall volumes.
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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