JK Lakshmi Cement

Stock Opportunities
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Few highlights of the stock

Total installed capacity : 13.90 MTPA
EPS expected to increase in next 2 qtrs Vs last year.
P/E @ 20.13 where as industry avg is @ 39.98.
Proposal to set up greenfield project @ pannan MP & UP
Key markets : North, East,West and Central.
Capacity mismatch in some regions ???

1 Like
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Good profit growth over last 5 years
Key markets:
The northern and western regions of India, mainly comprising of Rajasthan, Gujarat, Punjab, Haryana and parts of U.P accounts for around 75% of total revenues of the company

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Analysis by value-mining.in

Net profit of the company stood at Rs.426.22 crore in FY22 as compared to Rs.363.82 crore in FY21, up 17.15%.

The Net worth of the company stood at Rs.2452.35 crore in FY22 as against Rs.2078.92 crore in FY21, up 17.96%. The equity share capital of the company is Rs.58.85 crore at the end of the fiscal year ended March 2022. Total reserves and surpluses of the company stood at Rs.2393.50 crore at the end of FY22 as compared to Rs.2020.07 crore at the end of FY21, up 18.47%.

The current ratio of the company stood at 1.34 in FY22 as against 1.00 in FY21. The ideal current ratio of a company should be above 1.33. So, the current ratio of the company is above the ideal minimum ratio, which is a positive sign.

The debt-equity ratio of the company stood at 0.39 times for the financial year ended in March 2022 as compared to 0.54 times as of 31 March 2021.

Return on equity of JK Lakshmi Cement stood at 18.43% in FY22. ROE of the company looks pretty impressive when compared to the industry average of 9.7%. The management of the company is reinvesting most of the profit to grow the business at a very attractive rate of return. It means that the management is serious about maximising the shareholders’ return.

JK Lakshmi Cement has a ROCE of 20.01%. This is a very good return. It looks more impressive when compared to the cement industry average of 10%.

The company has proven it can reinvest in the business and generate higher returns on that capital employed, which is very attractive.

1 Like
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What could be the potential triggers for a positive PE re-rating? Realisations per MMT has already improved a bit, right? How much more room is there to improve realistically?

More of the expansion plans seem to be in the step down subsidiary. Does this affect valuation in terms of a holding company discount?

With the size and geographical footprint of JK Lakshmi, would they be featuring favourably in the list of potential M&As for the big boys in town? Isn’t there a valuation arbitrage here that they can leverage?

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not invested opinion other comments are welcome fact check it correct

  1. Merger Overview:
  • Udaipur Co. is merging with JK Lakshmi Cement. JK Lakshmi will issue 4 equity shares with a face value of ₹5 each for every 100 equity shares of ₹4 each held in Udaipur Co., excluding the shares already owned by JK Lakshmi.
  1. Ownership and Shares:
  • Udaipur Co. has 224 crore shares, 75% of which are owned by JK Lakshmi. JK Lakshmi Cement currently has 59 crore shares outstanding. The share prices are ₹34 for Udaipur Co. and ₹779 for JK Lakshmi.
  1. Dilution Calculation:
  • The merger leads to the issuance of 2.24 crore shares to Udaipur Co.'s minority shareholders, resulting in a 3.66% dilution for JK Lakshmi Cement’s shareholders.
  1. Benefit to JK Lakshmi:
  • JK Lakshmi benefits because it doesn’t issue new shares for the 75% of Udaipur Co. it already owns. This minimizes dilution and concentrates the benefits for JK Lakshmi’s existing shareholders.
  1. Impact on Udaipur Co.'s Minority Shareholders:
  • Udaipur Co.'s minority shareholders might perceive the deal as less favorable. Their stake in the merged entity is smaller, and they lose direct control over Udaipur Co., potentially feeling that their shares are undervalued.

The overall takeaway is that while the merger is beneficial for JK Lakshmi Cement, it may not be as favorable for Udaipur Co.’s minority shareholders due to the concentrated dilution and loss of control.

2 Likes
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Total Installed Cement Capacity for 2024: 16.5 million tons, including Udaipur Cement Works Limited.12

% of Revenue from Cement for 2024: The sources don’t explicitly state the percentage of revenue from cement, but they heavily imply that it constitutes the vast majority. The company is referred to as a “leading manufacturer and supplier of Cement and Cementitious products” and there is extensive discussion on cement production and sales, with limited mention of other product lines.34

Utilization Rate for 2024:

JK Lakshmi Cement: 81%
Udaipur Cement Works: 80%

Production for FY 2024:

Clinker Production:
JK Lakshmi Cement: 6.996 million tons8
Udaipur Cement Works: 1.975 million tons8

Cement Production:
JK Lakshmi Cement: 9.51 million tons
Udaipur Cement Works: 2.097 million tons for the full year, with 6.42 million tons in Q411

EBITDA for FY 2024: Rs. 928 crore12

EBITDA per ton in 2024: While the provided annual report doesn’t state the precise EBITDA per ton figure, it highlights achieving Rs. 1,000 EBITDA per ton for two consecutive quarters.13

Total Debt from the balance sheet for 2024 annual report:
Standalone: Rs. 700 crore14
Consolidated: Rs. 2,050 crore14

Total Cash & Cash Equivalents from the balance sheet for 2024 annual report:
Standalone: Rs. 375 crore14
Consolidated: Rs. 400 crore14

Capacity Expansion Plans and Timelines

Durg Expansion:

A new clinker line with a capacity of 2.3 million tons per annum (MTPA) will be added at the Durg integrated unit.15

Grinding units with a total cement capacity of 4.6 MTPA will be added, including 3 split location grinding units and 1 at the integrated plant.1516

Estimated cost: Rs. 2,500 crore1516

Targeted commissioning: By March 202715

Phase 1: Clinkerization and a grinding unit at Durg, and a grinding unit at Prayagraj, Uttar Pradesh, to be commissioned by the last quarter of FY 2026.1617

Surat Grinding Unit Expansion:

Capacity doubling from 1.5 million to 2.7 million tons.18
Phase 1: 0.7 million tons to be commissioned in October 2024.19
Phase 2: Remaining capacity to be commissioned by March/April 2026.19

Split Location Grinding Units:

Three units planned, with a total cement grinding capacity of 3.4 MTPA.20
Locations: Prayagraj in Uttar Pradesh, Madhubani in Bihar, and Patratu in Jharkhand.20
Timeline: Not specified in the sources.

Northeast Expansion:

Estimated cost: Rs. 1,800 crore, including Rs. 1,500 crore for the project and Rs. 300 crore as a balance payment for the acquisition.21
Capacity addition: 1.5 million tons.22
Timeline: Expected to start from FY 2027 onwards.22

Agrani Cement Expansion:

Timeline: Dependent on obtaining environmental clearance and completing land acquisition. Expected to be operational by March/April 2027.23

Overall Capacity Target: The company aims to reach a consolidated capacity of 30 MTPA by FY 2030-2033.1824

Recent Developments from Conference Calls

Cost Saving Initiatives:
The sources don’t mention specific cost-saving initiatives, but they highlight that JK Lakshmi Cement Ltd. is known as one of the least-cost producers of cement in the industry.25

The company is focused on increasing Thermal Substitution Rate (TSR) and Alternative Fuel Rate (AFR) usage to reduce reliance on conventional fuels and lower costs.17

Current Valuation: Fairly valued with $80 EV/ton

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