JK Lakshmi Cement Q2FY12 - EBITDA up despite increase in costs

JK Lakshmi Cement, a leading player in north India released it sSeptember quarter results on Saturday, posting a jump of 12.6% in its net profit to Rs 6.5 crore. Also, despite an increase of 31% in the overall cost, the EBITDA margin of the company improved by 120 bps and stood at Rs 41 crore, up by 48%.

This was mainly because of the strong performance on the topline of the company, which grew by 33% to Rs 354.13 crore due to better sales volume and higher sales realisation. The sales volume of the company for the quarter stood at 1.12 million tonnes, up by 19% on a YoY basis. Also realisation was up by 11%, which helped the company to post higher sales numbers during the quarter.

However, the higher interest rate scenario in the past two quarters has led to higher interest outgo of Rs 20 crore for the company as against Rs 11 crore in the previous year’s corresponding quarter, which impacted the PAT margin by 40 bps to 1.8%.

JK Lakshmi Cement’s major revenue comes from the northern region, which includes Delhi, Rajasthan, Haryana, UP, J&K and HP, and which has witnessed a price correction of Rs 10-15 per 50 kg bag due to low demand during the quarter. Although this region is currently facing low demand, the long-term demand outlook for the northern region is good due to huge real-estate projects that are likely to come up there. We expect players like JKLC to regain pricing power, with an improvement in the demand after monsoon.

However, the pickup in demand may remain slow due to the festive season, when we usually see a shortage of labor that hampers construction work. Therefore, the pickup in demand is expected to be slow in the coming quarter, and to gain pace only in Q4 FY12.

The stock closed at Rs 43.30 on Monday, up 1.17% on the NSE. So far, it has touched a high of Rs 44 and a low of Rs 41.95 in trade after the results announcement.