J K Lakshmi Cement
BSE SENSEX
30,435
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
9,429
JKLC IN
EBITDA disappointment led by lower realizations
118
Weak realizations in core markets
:
Volumes rose 6% YoY (+24.1% QoQ) to
56.3 / 0.9
2.28mt (est. of 2.27mt) due to ramp-up in its east operations. Realizations
535 / 327
fell 3% QoQ (+3.5% YoY) to INR3,531 (est. of INR3,698) on weak pricing in its
2/20/21
61
focus markets (such as Gujarat and east). EBITDA fell 16% YoY (-13% QoQ) to
54.1
INR0.716b (margin: 8.9%; -2.7pp YoY, -3.5pp QoQ) v/s est. of INR 893m,
18 May 2017
4QFY17 Results Update | Sector: Cement
CMP: INR478
TP: INR550(+15%)
Buy
Financials & Valuations (INR b)
Y/E Mar
2017 2018E
Net Sales
29.1
32.9
EBITDA
3.7
5.0
PAT
0.8
1.3
EPS (INR)
7.0
11.4
Gr. (%)
-1,694.8
63.9
BV/Sh (INR)
119.4
129.6
RoE (%)
6.0
9.2
RoCE (%)
8.7
8.1
P/E (x)
68.7
41.9
P/BV (x)
4.0
3.7
2019E
37.4
6.7
2.4
20.5
80.1
149.0
14.7
10.5
23.3
3.2
Estimate change
TP change
Rating change
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.
Market mix favorable
:
We remain positive on JKLC due to its higher
exposure to north/central markets, which 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 9.8x FY19E
EV/EBITDA and USD85/ton on FY19E capacity. We value JKLC at 11x FY19E
EV/EBITDA (implied EV of USD95), translating to TP of INR550.
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
Pradnya Ganar
(Pradnya.Ganar@MotilalOswal.com); +91 22 3980 4322

J K Lakshmi Cement
Exhibit 1:
Volume improved by 6% YoY
Volume (mt)
23
19
11 13
13
19 18
Growth (%)
39
29
15
20 18
6
-9
-2
4 6
Exhibit 2: Realizations declined QoQ by 3% (INR/ton)
7
2 1
-12
7
14
13
Source: Company, MOSL
Source: Company, MOSL
Exhibit 3: OPM declined QoQ due to lower realizations
EBITDA (INR m)
19
12
21
23 23 23
20
18
17
13 13
19
Margin (%)
Exhibit 4: Trend in EBITDA/ton (INR/t)
15
16
14 12
9
11 10 12
15 14
12
9
Source: MOSL, Company
Source: MOSL, Company
Exhibit 5: Key performance indicator
INR/Ton
Net realization
Expenditure
RM Cost
Employee Expenses
Power, Oil & Fuel
Freight
Other Expenses
Total Expenses
EBITDA
4QFY17
3,531
998
214
736
924
346
3,218
313
4QFY16
3,411
873
227
659
907
349
3,015
396
YoY (%)
3.5
14.3
-5.8
11.7
1.9
-0.9
6.7
-21
3QFY17
3,645
831
294
820
922
329
3,196
449
QoQ (%)
-3.1
20.1
-27.4
-10.2
0.3
5.4
0.7
-30
Source: MOSL, Company
Management commentary
Capacity Expansion:
The Company has increased its Durg capacity from 1.8mt to
2.7mt in 4QFY17. Moreover, the UCW subsidiary with 0.9mt has also become
operational. Both these capacity expansion projects has increased JKLC capacity
to 13mt. Additionally, the company is looking to increase its captive power
capacity by 7MW WHRS (INR 0.6b) and 20MW Thermal power capacity (INR
0.9b) at Durg. FY18 estimated capex at INR 2b.
Sales Mix:
Gujarat and Maharashtra constituted about 37% of overall volumes.
Energy Costs:
Petcoke prices increased by INR 800/tonne in 4QFY17 QoQ..
Current prices at INR 6300/tonne
18 May 2017
2

J K Lakshmi Cement
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.
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 9.8x FY19E EV/EBITDA and 85USD/ton on FY19 capacity. We value JKLC at EV
of 11x FY19 EV/EBITDA (implied EV of USD 95), translating to INR550/share.
Maintain
Buy.
Exhibit 6: Capacity expansion aids volume levers
Capacity (mt)
Dispatch (mt)
Effective Utilization (%)
105 103
100
92
88
88 91
83 86
78
Exhibit 7: Market mix improves (%)
North
20
15
26
80
East
35
West
22
27
65
84
64
51
FY09
FY11
FY13
FY15
FY17
FY19E
Cap mix FY14
Cap mix FY17
Vol mix FY14
Vol mix FY17
Source: Company, MOSL
Source: Company, MOSL
Exhibit 8: EBITDA/ton (INR/tonne) trend
963
771
431
925
686
Exhibit 9: RoE to improve FY17 onwards (%)
30
RoE
RoCE
812
536 588
371
458
577
716
20
10
0
-10
Source: Company, MOSL
Source: Company, MOSL
18 May 2017
3

J K Lakshmi Cement
Financials and Valuations
Income Statement
Y/E March
Net Sales
Change (%)
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
23,478
89.6
2,720
10.4
1,629
1,091
1,967
486
-390
107
-497
0
-431
86.8
-51
-103.4
-0.2
-1.073791
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
2017
29,104
11.1
25,450
87.4
3,654
12.6
1,724
1,930
1,887
698
742
0
742
0
-77
-10.4
819
-1,695
2.8
-0.435582
2017
589
13,462
14,050
790
19,901
34,741
47,167
18,473
28,694
2,000
4,005
8,080
2,501
895
487
4,198
8,039
8,039
0
42
34,741
2018E
32,939
13.2
27,969
84.9
4,970
15.1
1,830
3,140
1,847
428
1,720
0
1,720
378
0
22.0
1,342
63.9
4.1
-0.327258
2018E
589
14,666
15,254
790
19,401
35,445
49,167
20,303
28,864
2,000
4,005
8,968
2,713
1,007
1,028
4,221
8,392
8,241
151
576
35,445
(INR Million)
2019E
37,434
13.6
30,774
82.2
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 (%)
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
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
(INR Million)
6,660
17.8
1,906
4,754
1,701
400
3,453
0
3,453
1,036
0
30.0
2,417
80.1
6.5
-0.215059
2019E
589
16,945
17,534
790
16,401
34,725
51,167
22,210
28,957
2,000
4,005
9,334
2,741
1,144
1,452
3,997
9,572
9,365
207
-238
34,725
18 May 2017
4

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
2012
11.3
21.9
96.0
1.9
25.3
42.2
21.8
5.0
3.4
17.6
191
0.4
12.5
9.8
10.4
0.7
25.5
7
75
30.4
80.8
134.5
1.8
2
0.9
2013
16.0
28.6
107.0
2.5
19.5
29.9
16.7
4.5
2.9
13.7
171
0.5
15.4
10.3
10.6
0.8
20.4
8
69
19.6
27.8
35.5
1.4
3
1.1
2014
9.2
20.7
110.7
2.0
29.6
52.1
23.1
4.3
2.9
19.7
154
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
37.6
21.5
4.2
3.0
19.7
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
13.4
113.3
2.0
-420.5
-1,095.6
35.7
4.2
2.7
26.0
117
0.4
-0.4
0.6
0.5
0.8
33.5
12
123
13.6
-22.2
-103.4
0.9
1
1.4
2017
7.0
21.6
119.4
0.8
12.6
68.7
22.1
4.0
2.4
19.1
115
0.2
6.0
8.7
7.0
0.8
31.4
10
101
11.1
34.3
-1,694.8
1.0
1
1.4
2018E
11.4
27.0
129.6
1.0
10.3
41.9
17.7
3.7
2.1
14.0
104
0.2
9.2
8.1
7.8
0.9
30.1
10
91
13.2
36.0
63.9
1.1
2
1.3
2019E
20.5
36.7
149.0
1.0
5.7
23.3
13.0
3.2
1.7
9.8
85
0.2
14.7
10.5
10.8
1.1
26.7
10
91
13.6
34.0
80.1
1.0
3
0.9
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
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
2,720
486
0
13
1,151
4,371
-107
4,264
-4,472
-208
223
-4,249
368
209
-1,967
-275
-1,665
-1,650
1,768
118
2017
3,654
698
0
0
-943
3,409
0
3,409
-1,750
1,659
0
-1,750
0
700
-1,887
-103
-1,290
369
118
487
2018E
4,970
428
0
-378
6
5,026
0
5,026
-2,000
3,026
0
-2,000
0
-500
-1,847
-138
-2,485
541
487
1,028
(INR Million)
2019E
6,660
400
0
-1,036
1,239
7,263
0
7,263
-2,000
5,263
0
-2,000
0
-3,000
-1,701
-138
-4,838
425
1,028
1,452
18 May 2017
5

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 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Mar-17
Promoter
DII
FII
Others
45.9
23.2
10.3
20.6
Dec-16
45.9
22.1
11.2
20.8
Mar-16
45.9
19.8
13.1
21.1
Source: Capitaline
Exhibit 3: Top holders
Holder Name
HDFC
STANDARD
LIFE
INSURANCE
COMPANY LIMITED
FRANKLIN TEMPLETON MUTUAL FUND A/C
FRANKLIN INDIA HIGH GROWTH COMPANIES
FUND AND FRANKLIN INDIA SMAL
LIFE INSURANCE CORPORATION OF INDIA
GOVERNMENT PENSION FUND GLOBAL
Sachin Bansal
% Holding
3.7
2.8
2.5
2.3
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)
FY18
FY19
MOSL
forecast
11.4
20.5
Consensus
forecast
17.2
30.8
Variation (%)
-33.7
-33.5
Source: Bloomberg
Source: Capitaline
18 May 2017
6

J K Lakshmi Cement
NOTES
18 May 2017
7

Disclosures
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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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Contact : (+65) 68189232
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JK LAKSHMI CEMENT
18 May 2017
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
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Motilal Oswal Securities Ltd
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