MOSL: J K LAKSHMI CEMENT (Buy)-EBITDA disappointment led by lower realizations
​J K Lakshmi Cement: EBITDA disappointment led by lower realizations
(jKlC IN, Mkt Cap USD0.9b, CMP INR478, TP INR550, 15% Upside, BUY)
- Weak realizations in core markets: Volumes rose 6% YoY (+24.1% QoQ) to 2.28mt (est. of 2.27mt) due to ramp-up in its east operations. Realizations fell 3% QoQ (+3.5% YoY) to INR3,531 (est. of INR3,698) on weak pricing in its focus markets (such as Gujarat and east). EBITDA fell 16% YoY (-13% QoQ) to INR0.716b (margin: 8.9%; -2.7pp YoY, -3.5pp QoQ) v/s est. of INR 893m, translating into EBITDA/ton of INR313 (-INR83 YoY, -INR136 QoQ) v/s est. of INR394. Revenue grew 10% YoY (+20% QoQ) to INR8.1b (est. of INR7.98b), while net profit was INR207m (est. of loss of INR84m).
- Cost measures to improve profitability: JKLC has planned various cost-saving initiatives: (1) Laying conveyor belt over next two quarters to reduce freight expenses on limestone by INR30 to INR40/ton. (2) Re-allocating excess captive power (18MW) from Sirohi to Udaipur Cement Works. (3) Greenfield WHRS with capacity of 7MW and thermal power with capacity of 20MW in Durg to save power cost by INR200/t for eastern operations.
- FY17 performance: JKLC’s volumes rose 9% YoY to 7.97mt due to higher volumes from east and ramp-up of operations at recently commissioned Surat GU. Revenue grew 11% YoY to INR29.1b as realizations rose 2% YoY to INR3,651/t. EBITDA grew 34% YoY to INR3.65b with EBITDA/t up 24% YoY to INR458. JKLC reported PAT of INR819m v/s loss of INR51m in FY16.
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.
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