SHARETIPSINFO >>Research Reports >>JK LAKSHMI CEMENT (26-12-2009)

COMPANY OVERVIEW:
J K Lakshmi Cement was established in the year 1982.  It has state of art plant in Sirohi, Rajasthan. With capacity expansion and further commissioning of a split location grinding unit at Motibhovan, Kalol (Gujarat), the combined capacity today stands at 4.75 mn MT per annum.
It has wide network of 70 cements dumps and over 2200 dealers spread across the northern India and western India.
Company also boosts to be the integral part of the major projects like Sardar Sarovar Dam, Golden Quadrilateral, and IGNP.

Important client List of Company:
L&T
Nagarjuna Construction
NTPC
IVRCL
TATA  Projects
Rosa Power Supply
Unity Infra
Everest Industries
Valecha Engineering
Punj Lloyd

PRODUCT MIX:

INDUSTRY OUTLOOK:
Indian cement industry has total installed capacity of 219 million tons. It is the second largest cement producer in the world.
Industry is expected to do well at least for next 5 years. Higher government spending on infrastructure will keep the demand buoyant. Cement demand is expected to grow at 10% annually. While the global cement industry is growing at 5%. The per capita consumption of cement in India is low at 156 kg while globally it is at 396 kg.
Demand for cement is also expected to be good from the housing sector. There is short supply of houses which needs to be filled.
Government social projects under NAREGA scheme will also see good demand for cement. Overall cement sector will outperform market in coming quarters.

INVESTMENT RATIONAL:
Good demand is expected from the Infrastructure and Housing projects.
Higher government expenditure on infrastructure makes it recession proof.
Recent hikes in cement prices will help the company to better its margin.
Company use of Pet coke instead of coal helps in saving fuel cost.
It is part of major government project.
It has good corporate client base.
Company has 15000 member in mason`s club. They are provided free accident insurance cover. This also helps in pushing the product to retail clients.

SHAREHOLDING PATTERN:

FINANCIAL:

Key Highlights:
CAGR IN TOTAL INCOME IS 25.5%.
CAGR IN PBDITA IS 34.56%.
CAGR IN PAT IS 47.10%.

RATIOS:

Key Highlights:
EPS has grown at CAGR of 47.10% over the period of 4 years.
PBDITA margin increased from 18% in FY06 to 22.5% in FY09. Margin declined by around 4% in FY09 as compared to FY08, the decline was due to higher fuel cost and raw material.
NPM margin increased from 7.8% in FY06 to 12.66% in FY09. Margin declined by around 4% in FY09 as compared to FY08, the decline was due to higher fuel cost and raw material.
Interest Cover increased from 3.8 in FY06 to 11.8 in FY09.

COMPARISION OF Q2FY2010 WITH Q2FY2009:

Key Highlights:
Total Income increased 1.25% in Q2FY10 on YoY.
PBDITA increased 105.7% in Q2FY10 on YoY.
PAT increased 75.5% in Q2FY10 on YoY.

VALUATION &OUTLOOK:
At cmp of Rs 68 it is trading at just 2.9 xs to trailing twelve months EPS. This makes the stock undervalued at current level. On the other hand industry average of is 10X. If we value the counter at considerable discount at 5X, the fair value comes at Rs 145.
It is dividend paying company, at current price dividend yield comes at around 3%. Book value per share is Rs 64.
Fundamentally company is value pick at this price.

CONCLUSION:
Investors with time horizon of 8-12 months could take position on the counter. The downside on the counter seems to be limited at this level.

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