Stock Analysis: JK Lakshmi Cement

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History/Management/Business

Part of over 132 years old JK Organisation, JKL began its journey in 1982 for cement manufacturing with just 0.5 MTPA capacity at Sirohi, Rajasthan with current overall capacity stands at 13.4 MTPA in 2020.

For Sirohi Plant, Rajasthan/MP and Gujarat are its major markets comprising 40% and 35%.

For the Durg plant, the company’s major markets are Chhattisgarh Odisha, Madhya Pradesh, and Maharashtra comprising 58%,16%, 10% & 7%.

MTPA

2019-20

2018-19

2017-18

2016-17

Capacity

13.4

12.5

12.5

10.9

Utilization

75%

85%

74%

79%

Management and Shareholding

  • Promoter holding stands at 46.21% with Bengal and Assam company holds 44.28%. Bengal and Assam company in which promoter holds 72.66% share (owned by Singhania Family is various forms).
  • Institutional holding stands at as high as 30.4% with mutual funds holding 16.8% & FPI holding 10.41%
  • Bengal and Assam company Mcap 1584 cr will its investment in JK Laxmi cement is of value around 1479cr.
  • Chairman and MD: Shri Bharat Hari Singhania, aged 81 years, is an industrialist with over 62 years of experience in managing various industries including Cement, Automotive Tyres, Paper, Jute, Synthetics, high yielding Hybrid Seeds, etc

FINANCIALS

  • Realization per ton rose for FY20 after declining in FY19, Realisation per tonne from FY18 to FY20 was 3981, 3873 & 4342 per ton.
  • EBITDA per ton rose from just around 460 per ton for FY18 to around 794 per ton for FY20 after declining to 411 per ton in FY19, i.e. a jump of 93% YoY for FY20.
  • The company has been continuously increasing its capacity while borrowings are in fact reducing after rising from FY14 to FY17 from 1681cr to 2687cr and reducing thereafter YOY and stands at just 1469cr.
  • During the time FY14 to FY17 Fixed asset rose from 1701cr to 3556cr i.e. rise of 1855cr out of which 1006cr being financed by borrowings and After that Fixed assets have remained at the same level which was 3585cr as on 31st March 2020 and hence FCF was used to repay the debt of 1218cr from FY17 to FY20.
  • The company is Trading at Mcap/Sales at 0.77 and EV/EBITDA of 5.9.
  • COMC as % of revenue has been reducing YoY which was 19.7% for FY16 reduced to 14.1% in FY20.
  • Power Fuel cost as % of revenue rose to as high as 25% in FY19 but reduced to 22% for FY20.
  • Freight cost as % of revenue has remained around 25% from FY16 to FY19 and reduced to just 19.7% for FY20.
  • The company has controlled its cost on all important parameters COMC. Freight and Power /Fuel cost which together accounted from 66% of total revenue for FY16,64.4% for FY17, 67.5% for FY18, 64% for FY19 and reducing considerably to 56% in FY20 and Hence we saw EBITDA margin zooming from just 9.2% in FY16 to 18.3% in FY20.
  • The asset Turnover ratio is at around 1.17 for FY20 which was 0.81 for FY16.
  • FCF has been healthy from FY16 to FY20, 150cr, 236cr, 319cr, 479cr and 436 and FCF/Interest has been 0.68, 0.97, 1.21, 1.88 & 1.94 thus becoming healthy YoY.
  • D/E ration reduced from 1.71 as of FY16 ending to 0.87 for FY20 ending.
  • Management has deferred the announcement of its proposed 2.5mnte expansion in the North, given the likely impact of Covid-19 on demand.
  • Capex for the same is estimated at Rs15bn which may be incurred post FY21 thus debt is expected to reduce further with healthy FCF.

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Arman Nahar
C.A. who is a USA CFA L3 candidate | Cleared L1 & L2 | Doing independent equity research since 2016 | Screens stocks for investment | Makes in-depth valuation models | Crafts portfolios.
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