J K Lakshmi Cement
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
EBITDA disappointment led by lower realizations
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
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,
18 May 2017
4QFY17 Results Update | Sector: Cement
Financials & Valuations (INR b)
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.
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.
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@motilaloswal.com); +91 22 3982 5436
(Pradnya.Ganar@MotilalOswal.com); +91 22 3980 4322