JK Lakshmi Cement Posts Subdued Performance In Q2FY14

JK Lakshmi Cement has posted subdued figures for Q2FY14. The topline of the company went down by 9% and stood at Rs 448.87 crore in Q2FY14 as against Rs 491.87 crore in Q2FY13 while the bottomline took the severe hit as it declined by 80% to Rs 10.30 crore. While on half yearly basis Net sales of the company declined by 12% to Rs 905 crore as compared to Rs 1025 crore of previous year whereas Net profit suffered by 74% in H1FY14 to stand at Rs 26 crore.

The total expenses (Excluding financial cost) of the company have increased by 4% to Rs 427 crore on YOY basis. The freight cost rose by 5% to Rs 100 crore in Q2FY14 from Rs 95 crore is same duration previous year. However, the fuel cost, which is the major concern for the cement manufacturing has dipped by 9% on YOY basis. Moreover, the company has posted decline in its other income by 44% on YOY basis.

The EBITDA margin of the company has gone down to 13% from 23% on YOY basis. The company has reported the increase in the production in its marketing areas of North and West Zone by 7% even in sluggish market condition. Hence, even though production increased sales remained subdued, this in turn has hampered the realisation of the company.

Going further, the company has reduced its power consumption from 75KWH (Kilo Watt per Hour) to 72 KWH. Company has also improved its fuel consumption amenities in Q2FY14 because of which energy for clinker production has reduced to 729K.Cal/Kg (Kilo Calorie per Kilo gram) from 738 K.Cal/Kg in previous quarter.

Company has posted pleasing progress in its ongoing projects including Green Field Project at Durg which is expected to be completed on October 2014, improving the grinding capacity at Jhajjar, Haryana, and expansion of Kiln I at Jaykaypuram and Solar project in Rajasthan . Company is expecting to increase its capacity from 5.7 MT (million tonnes) to 11.30 MT on completion of these projects.

On YTD basis the stock of JK Lakshmi Cement has declined by 58% to trade at Rs 68.25 with TTM price to earnings ratio at 8.03x. Downtrend in the realty and infrastructure sector has directly impacted the cement industry. Moreover, another cause for decline of cement sector is lower per bag price and higher freight cost during Q2FY13. Considering the overall scenario, we would recommend investors to stay away from this scrip.