JK Lakshmi Cement - 1QFY2013 Result Update - Angel Broking

JK Lakshmi Cement (JKLC)'s net profit in Q1FY2013 grew by 121% yoy driven by a strong 23.3% yoy improvement in volumes due to healthy demand scenario in the company's key markets of Gujarat and north India. The volume growth was aided by additional volumes from the company's new split grinding capacity in Jhajjar, which was commissioned in April 2012. The realization too was higher by 9.6% yoy (up 3.6% qoq).

OPM at 22.8%, up 288bp yoy: During 1QFY2013, JKLC registered a robust top-line growth of 34.3% yoy to Rs.533cr. Volumes stood at 1.39mn tonne. Realization grew by 9.6% yoy and stood at Rs.3,851/tonne. The company posted a healthy 288bp yoy improvement in its OPM to 22.8% led by a better realization and reduction in power and fuel costs. The company's per tonne power consumption fell yoy during the quarter and stood at 76kwh (vs 78kwh in 1QFY2012). Per-tonne coal consumption too fell on a y-o-y basis and stood at 83kwh (86kwh in 1QFY2012). Thus, per-tonne power and fuel costs fell 12.3% on a y-o-y basis.

Outlook and valuation: Going forward, we expect JKLC to post a 15.4% CAGR in its top-line over FY2012-14. More than 79% of the company's capacities are located in Rajasthan, which is India's biggest cement cluster state-wise. Further, the company's stock price has run up considerably over the past few months and we believe there is limited upside potential from the current levels considering the locational disadvantage it faces. Hence we recommend a Neutral rating on the stock.

Source : Equity Bulls

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