J K Lakshmi Cement
BSE SENSEX
27,916
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
8,615
JKLC IN
117.7
56.5 / 0.9
514 / 253
0/28/24
40
54.1
2018E
37.9
7.8
3.6
30.3
249.2
139.5
23.6
14.4
8.4
99
27 October 2016
2QFY17 Results Update | Sector: Cement
CMP: INR480
TP: INR606 (+26%)
Buy
Realization improvement in a seasonally weak quarter
Financials & Valuations (INR b)
Y/E Mar
2016 2017E
Sales
26.2
31.0
EBITDA
2.7
4.6
NP
0.0
1.0
Adj EPS (INR)
0.4
8.7
EPS Gr. (%)
-97.1 2,230.2
BV/Sh. (INR)
113.3 117.9
RoE (%)
0.3
7.5
RoCE (%)
-0.9
7.3
EV/EBITDA (x)
26.2
15.0
EV/Ton (USD)
117
115
Estimate change
TP change
Rating change
Strong beat led by sequentially higher realization:
JK Lakshmi Cement’s (JKLC)
volumes fell 2% YoY to 1.72m tons (ex-east, volume declined 8% YoY) due to
heavy rains in its focus markets. Realizations rose 3.5% YoY (+4.7% QoQ) as
price hikes in June-16 largely sustained through 2QFY17. EBITDA increased
37% YoY to INR0.94b (margin: 14.3%; +3.7pp YoY, -0.8pp QoQ), translating
into EBITDA/ton of INR546 (+INR154/t YoY, flat QoQ) due to higher prices and
cost savings. Revenue grew 2% YoY to INR6.6b, while net profit was INR249m.
Cost-reduction initiatives at eastern unit to improve profitability:
The Durg
plant, despite operating at ~90-95% utilization, has been only breaking even at
EBITDA level. Management has planned various cost-saving initiatives like (a)
Setting up of waste heat recovery system; (b) Relocating captive power plant
from north; and (c) Laying of conveyor belt to reduce cost of operations over
next 18 months. Total capex toward cost-reduction effort would be INR4b.
Consolidated capacity to increase to 13m tons by FY18:
JKLC’s consolidated
capacity has increased to 10m tons with commissioning of its Surat grinding
unit in 2QFY17. It is further increasing its Durg capacity by 0.9m tons at
estimated capex of INR300m. Integrated capacity of 1.6m tons at its subsidiary
Udaipur unit should be commissioned by Dec-16 at estimated capex of INR8b.
Market mix favorable:
We continue remaining positive on the company due to
its higher exposure to north/central markets, which we believe are likely to see
highest realization increase due to utilization improvement. However,
turnaround of eastern operations would be a key monitorable. The stock
trades at 15x/8x FY17/18E EV/EBITDA and 115/99 USD/ton. We value JKLC at
EV of 10x FY18 EV/EBITDA (implied EV of USD 130), translating to
INR606/share. Maintain
Buy.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Abhishek Ghosh
(Abhishek.Ghosh@motilaloswal.com); +91 22 3982 5436
Varun Gadia
(Varun.gadia@motilaloswal.com); +91 22 3982 5446

J K Lakshmi Cement
Exhibit 1:
Volume declined by 2% due to heavy rains
Volume (mt)
Growth (%)
39
11
19
13 13
23
7
2 1
-12
7
14
19 18
13
6 -9
15
20 18
29
-2
Exhibit 2: Realizations improved QoQ by 4.7% (INR/ton)
-10
Source: Company, MOSL
Source: Company, MOSL
Exhibit 3: OPM marginally declined QoQ due to increase in
P&F and Freight costs
EBITDA (INR m)
1919
12
21
23 23 23
20
18
17 19
13 13
16
Margin (%)
Exhibit 4: Trend in EBITDA/ton (INR)
15
14 12
9
11 10 11
15 14
Source: Company, MOSL
Source: Company, MOSL
Exhibit 5: Key performance indicator
INR/Ton
Net realization
Expenditure
RM Cost
Employee Expenses
Power, Oil & Fuel
Freight
Other Expenses
Total Expenses
EBITDA
2QFY17
3,822
978
301
679
914
404
3,276
546
2QFY16
3,694
1,072
273
751
871
336
3,303
391
YoY (%)
3.5
-6.6
10.5
-9.6
4.9
30.5
-0.6
39.5
1QFY16
3,649
1,001
252
616
857
370
3,097
552
QoQ (%)
4.7
-2.5
19.2
10.2
6.6
9.1
5.8
-1.0
Management commentary
Capacity expansion:
The consolidated capacity of the company has increased to
10m tons with the recent commissioning of its Surat grinding unit in 2QFY17. It
is further increasing its Durg capacity by 0.9m tons at an estimated capex of
INR300mn. The integrated capacity of 1.6mtons at its subsidiary Udaipur unit is
likely to get commissioned by December-16 at an estimated capex of INR8bn
Cost reduction initiatives at Easter unit:
JKLC eastern unit has been only
breaking even at EBITDA level despite operating at close to 100% utilization due
to cost inefficiencies. In order to improve cost efficiencies, management is
putting up a conveyor belt for limestone transportation, Waste Heat Recovery
System to meet 30% of its power requirement, relocating the captive power
2
27 October 2016

J K Lakshmi Cement
plant from its Northern operations. The combined capex towards the cost
reduction programs would be INR4bn.
Management expects cost savings for its eastern units to the extent of INR200/t
INR 70 to INR 80/ton from WHRs unit that will be operational from
September 2017
INR 80 to 90/ton from thermal power unit that will be operational from
March 2017
INR 30 to 40/ton from conveyor belt that will increase productivity
Demand expected to grow 8 to 10% due to pre Diwali spending, government
initiatives and good monsoons
North Trade mix at 50% vs. 50% Non-Trade and East Trade mix at 20% vs. 80%
Non-Trade
The impact of higher power and fuel costs will not be completely seen in
December quarter; Most of the power and fuel impact will be seen in 4QFY17
Standalone net debt at ~15b at the end of 2QFY17.
Estimate capex for FY17 would be INR 2bn for standalone operations.
Fundamental strength getting stained by rising concerns in east operations
JKLC has a strong market-mix with 75% of its sales in North markets . It has also
diversified itself by adding capacity in the east. Capacity addition in Surat and
east offer further growth potential for the company.
The company has a superior cost structure due to (a) consistently improving
fuel efficiency (in top quartile among industry players), (b) 100% self-sufficiency
in power in north, and (c) competitive fuel mix with pet coke (85%).
However the eastern operations profitability is impacted due to cost
inefficiencies in form of higher power and fuel cost. Management is taking
prudent measure to improve profitability of the unit in next 1-2 years.
Net debt likely to have peaked out with the conclusion of large part of ongoing
expansion; Company expects to refinance loans taking benefit of lower interest
rates.
We continue to remain positive on the company due to its higher exposure to
North and Central markets which we believe is likely to see highest realization
increase on back of utilization improvement. However the turnaround of
eastern operations would be a key monitorable. The stock trades at 15x/8x
FY17/18E EV/EBITDA and 115/99 USD/ton. We value JKLC at EV of 10x FY18
EV/EBITDA (implied EV of USD 130), translating to INR606/share. Maintain Buy
27 October 2016
3

J K Lakshmi Cement
Exhibit 6: Capacity expansion aids volume levers
Capacity (mt)
Effective Utilization (%)
105
100
88
78
91
Dispatch (mt)
103
92
83
88
94
Exhibit 7: Market mix improves (%)
North
East
20
15
26
80
West
22
27
65
51
Vol mix FY17
35
64
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E
Source: Company, MOSL
Cap mix FY14
Cap mix FY17
Vol mix FY14
Source: Company, MOSL
Exhibit 8: end in EBITDA/ton (INR)
963
771
431
925
686
Exhibit 9: RoE to improve FY17 onwards (%)
30
RoE
RoCE
812
536 588
369
564
850
20
10
0
-10
Source: Company, MOSL
Source: Company, MOSL
27 October 2016
4

J K Lakshmi Cement
Financials and valuations
Income Statement
Y/E March
Net Sales
Change (%)
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income - Rec.
PBT bef. EO Exp.
EO Expense/(Income)
PBT after EO Exp.
Current Tax
Deferred Tax
Tax Rate (%)
PAT Adj for EO items
Change (%)
Margin (%)
2011
13,168
-11.7
11,314
85.9
1,854
14.1
846
1,008
605
385
788
0
788
45
151
25.0
591
-75.5
4.5
2012
17,177
30.4
13,824
80.5
3,353
19.5
1,297
2,056
874
638
1,820
392
1,427
179
161
23.8
1,387
134.5
8.1
2013
20,550
19.6
16,262
79.1
4,287
20.9
1,489
2,798
835
555
2,517
163
2,354
696
-99
25.3
1,879
35.5
9.1
2014
20,566
0.1
17,546
85.3
3,020
14.7
1,352
1,668
772
443
1,339
185
1,154
132
92
19.4
1,079
-42.6
5.2
2015
23,071
12.2
19,576
84.9
3,495
15.1
1,119
2,376
907
282
1,750
633
1,118
87
75
14.5
1,497
38.7
6.5
2016
26,199
13.6
23,497
89.7
2,701
10.3
1,629
1,073
1,923
603
-248
107
-355
0
-418
117.7
44
-97.1
0.2
0
2017E
30,984
18.3
26,357
85.1
4,628
14.9
1,797
2,831
1,920
530
1,440
0
1,440
418
0
29.0
1,023
2,230.2
3.3
0.2193
2017E
589
13,287
13,875
867
19,201
33,943
47,167
18,547
28,621
2,000
4,005
8,076
2,647
947
39
4,443
8,758
8,508
251
-683
33,943
(INR Million)
2018E
37,875
22.2
30,057
79.4
7,817
20.6
1,792
6,025
1,638
375
4,762
0
4,762
1,190
0
25.0
3,571
249.2
9.4
0.17610428
Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Deferred Liabilities
Total Loans
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Provisions
Net Current Assets
Appl. of Funds
2011
612
9,851
10,463
1,458
8,483
20,404
23,186
9,376
13,810
409
5,278
4,880
1,199
280
888
2,514
4,359
4,127
232
521
20,404
2012
612
11,140
11,752
1,233
11,004
23,989
24,486
11,193
13,293
2,941
4,538
7,085
1,201
382
890
4,612
3,868
3,513
355
3,218
23,989
2013
589
12,010
12,598
1,134
13,370
27,101
26,782
12,436
14,346
6,881
4,065
6,145
1,148
501
127
4,369
4,335
3,896
439
1,810
27,101
2014
589
12,444
13,032
1,226
16,042
30,300
29,305
13,590
15,715
9,080
4,477
6,392
1,024
555
356
4,457
5,364
4,950
415
1,028
30,300
2015
589
12,719
13,307
1,284
18,992
33,584
40,946
15,121
25,825
2,000
4,228
8,819
2,235
705
1,768
4,112
7,289
6,815
473
1,531
33,584
2016
589
12,746
13,334
867
19,201
33,402
47,417
16,749
30,668
0
4,005
7,746
2,406
965
118
4,258
9,017
8,804
213
-1,271
33,402
(INR Million)
2018E
589
15,825
16,413
867
17,201
34,481
47,167
20,339
26,828
4,000
4,005
9,599
3,120
1,157
469
4,853
9,951
9,475
476
-352
34,481
E: MOSL Estimates; * Adjusted for treasury stocks
27 October 2016
5

J K Lakshmi Cement
Financials and Valuations
Ratios
Y/E March
Basic (INR) *
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x) *
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
EV/Ton (USD)
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Growth (%)
Sales
EBITDA
PAT
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Debt/Equity
* Adjusted for treasury stocks
2011
4.8
11.7
85.5
1.2
30.1
2012
11.3
21.9
96.0
1.9
25.3
42.4
21.9
5.0
3.4
17.7
192
0.4
5.7
5.4
6.0
0.6
33.2
7
114
-11.7
-56.3
-75.5
1.1
2
0.8
12.5
9.8
10.4
0.7
25.5
7
75
30.4
80.8
134.5
1.8
2
0.9
15.4
10.3
10.6
0.8
20.4
8
69
19.6
27.8
35.5
1.4
3
1.1
2013
16.0
28.6
107.0
2.5
19.5
2014
9.2
20.7
110.7
2.0
29.6
52.4
23.3
4.3
2.9
19.8
155
0.4
8.4
6.2
5.7
0.7
18.2
9
88
0.1
-29.6
-42.6
1.2
2
1.2
2015
12.7
22.2
113.1
2.0
28.8
37.8
21.6
4.2
3.0
19.8
128
0.4
11.4
7.4
7.6
0.7
35.4
10
108
12.2
15.7
38.7
1.2
3
1.4
2016
0.4
14.2
113.3
2.0
437.9
1,288.1
33.8
4.2
2.7
26.2
117
0.4
0.3
-0.9
-0.7
0.8
33.5
12
123
13.6
-22.7
-97.1
0.9
1
1.4
2017E
8.7
24.0
117.9
3.5
47.1
55.3
20.0
4.1
2.2
15.0
115
0.7
7.5
7.3
6.6
0.9
31.2
10
100
18.3
71.3
2,230.2
0.9
1
1.4
2018E
30.3
45.6
139.5
7.5
28.9
15.8
10.5
3.4
1.7
8.4
99
1.6
23.6
14.4
14.7
1.1
30.1
10
91
22.2
68.9
249.2
1.0
4
1.0
Cash Flow Statement
Y/E March
Oper. Profit/(Loss) before Tax
Interest/Dividends Recd.
Depreciation
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
EO expense
CF from Operating incl EO
(inc)/dec in FA
Free Cash Flow
(Pur)/Sale of Investments
CF from investments
Issue of Shares
(Inc)/Dec in Debt
Interest Paid
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
2011
1,854
385
0
-45
1,253
3,446
123
3,569
-2,739
830
-472
-3,212
-157
-734
-605
-178
-1,674
-1,317
2,204
887
2012
3,353
638
0
-179
-2,693
1,119
127
1,246
-3,831
-2,585
740
-3,091
476
2,521
-874
-275
1,848
3
888
890
2013
4,287
555
0
-696
644
4,790
-163
4,627
-6,236
-1,610
473
-5,763
-569
2,366
-835
-342
619
-518
890
372
2014
3,020
443
0
-132
1,012
4,342
-185
4,157
-4,723
-565
-413
-5,135
-220
2,673
-772
-275
1,405
427
127
554
2015
3,495
282
0
-103
909
4,582
-633
3,950
-4,560
-610
249
-4,311
-406
2,950
-907
-275
1,361
1,000
356
1,356
2016
2,701
603
0
0
1,151
4,455
-107
4,348
-4,472
-124
223
-4,249
240
209
-1,923
-275
-1,749
-1,650
1,768
118
2017E
4,628
530
0
-418
-667
4,073
0
4,073
-1,750
2,323
0
-1,750
0
0
-1,920
-482
-2,402
-79
118
39
(INR Million)
2018E
7,817
375
0
-1,190
99
7,101
0
7,101
-2,000
5,101
0
-2,000
0
-2,000
-1,638
-1,033
-4,671
430
39
469
E: MOSL Estimates; * Adjusted for treasury stocks
27 October 2016
6

J K Lakshmi Cement
Corporate profile
Company description
JK Lakshmi Cement (JKLC), promoted by the HS
Singhania group, is a North India-based cement
company. It has a cement capacity of 5.3mtpa and a
CPP capacity of 66MW, which makes it self-
sufficient in energy. While the North and the West
account for 90-95% of its current dispatch mix,
ongoing greenfield expansion of 2.7mtpa at Durg in
Chhattisgarh would enhance its presence in the
central and eastern markets, raising total capacity
to 9.2mtpa by FY15.
Exhibit 2: Shareholding pattern (%)
Sep-16
Promoter
DII
FII
Others
45.9
21.0
12.2
20.9
Jun-16
45.9
19.8
12.6
21.7
Sep-15
45.9
18.4
14.4
21.3
Source: Capitaline
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 3: Top holders
Holder Name
Sachin Bansal & Vivek Bansal
Hdfc Standard Life Insurance Company
Limited
Goldman Sachs India Fund Limited
Life Insurance Corporation Of India
Government Pension Fund Global
% Holding
4.0
3.8
2.5
2.5
2.3
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
Bharat Hari Singhania
Vinita Singhania
Brijesh K Daga
Designation
Chairman & Managing
Director
Vice Chairman & M.D.
Company Secretary
Exhibit 5: Directors
Name
B V Bhargava
N G Khaitan
Raghupati Singhania
S K Wali
Name
K N Memani
Pradeep Dinodia
Ravi Jhunjhunwala
Shailendra Chouksey
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
Lodha & Co
Namo Narain Agarwal
R J Goel & Co
Type
Statutory
Secretarial Audit
Cost Auditor
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
MOSL
forecast
8.7
30.3
Consensus
forecast
11.6
25.2
Variation (%)
-25.3
20.2
Source: Bloomberg
Source: Capitaline
27 October 2016
7

Disclosures
This document has been prepared by Motilal Oswal Securities Limited (hereinafter referred to as Most) to provide information about the company (ies) and/sector(s), if any, covered in the report and
Lakshmi Cement
J K
may be distributed by it and/or
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In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Varun Kumar
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Kadambari Balachandran
kadambari.balachandran@motilaloswal.com
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27 October 2016
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
Motilal Oswal Securities Ltd
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