Buy JK Lakshmi Cement – Elara Capital

JK Lakshmi Cement Q1FY11 results way below our and streets exceptions

JK Lakshmi Cement has reported 7.8% YoY decline in net sales to INR 3,236 Million. Total sales volume of the company increased by 1% YoY( down 27.5% QoQ) to 1.02 million tonnes.

EBITDA declined YoY by 52.8% to INR 563 million due to fall in margins. EBITDA margins declined YoY by 1660 bps (QoQ by 580 bps) to 17.4%.

Total cost per tonne increased 8.8% QoQ to INR 2,618 per tonne primarily due to sharp decline in power & fuel cost. Power & Fuel costs increased QoQ by 51.8% to INR 864 per tonne due to sharp increase in fuel prices.

Net profit of the company declined 78.6% YoY (76% QoQ) to INR 168 million as compared to our estimates of INR 438 million.

Our FY11 earnings estimates for the company were conservative. So though we may downgrade the earnings of the company, it is unlikely to be very sharp. At CMP of INR 68 stock is trading at EV per tonne of USD 45 on it FY11E capacity. We believe that most of the bad news has been factored in the stock prices.

Source : Equity Bulls

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