JK Lakshmi Cement - 4QFY2012 Result Update - Angel Broking

JK Lakshmi Cement (JKLC) reported a strong performance for 4QFY2012, with the company's adjusted net profit coming in at Rs.73cr in 4QFY2012 as against Rs.32cr in 4QFY2011. Bottom-line growth was driven by strong 12.8% yoy growth in realization, coupled with a similar 12.7% yoy improvement in volumes. During 4QFY2012, the company changed its method of charging depreciation on captive power plants from straight line to WDV with retrospective effect, which resulted in additional depreciation of Rs.63cr, of which Rs.39cr pertaining to previous years was charged as exceptional expenses. We maintain our Buy rating on the stock.

OPM at 21.5%, up 291bp yoy: During 4QFY2012, JKLC registered top-line growth of 26.3% yoy to Rs.527cr on account of higher volumes and better realization. The company's volumes (including clinker) for the quarter stood at 1.42mn tonnes, up 12.7% yoy. Realization growth of 12.8% yoy was aided by strong demand in the company's prime markets. Despite the substantial increase in raw-material costs, OPM was boosted by a significant 14.5% yoy decline in per tonne power and fuel (P&F) cost. P&F cost declined due to lower pet coke prices, higher use of bio-mass and better energy efficiency.

Outlook and valuation: Going forward, we expect JKLC to post a healthy 14.5% CAGR in its top line over FY2012-14E, aided by an 11.7% CAGR in dispatches over the period. At the CMP, the stock is trading at cheap valuations in terms of replacement cost (EV/tonne of US$43 on FY2014E capacity), even after considering its presence in unfavorable locations. Hence, we maintain our Buy recommendation on the stock with a target price of Rs.79.

Source : Equity Bulls

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