>JK LAKSHMI CEMENT LIMITED (CD EQUIRESEARCH)

Company Brief
JK Lakshmi Cement Ltd. (JKLC) is one of the established north based Cement Company, with a state of‐the‐art plant at Rajasthan and Gujarat, and having a capacity of 4.75 million tonne The
companyʹs product mix includes blended cement, ready‐mix concrete and plaster of paris, which are distributed through its large network of over 2,000 dealers across North and West India.

Highlights
■ JK Lakshmi Cement has increased its cement capacity by 30% in March 09, which should enable it to enhance its sales volume by 12% in FY10 and by 4% in FY11.

■ JKLC is further increasing its cement capacity by 67% to 7.45 mtps by Oct 2012, which will enable it to have access to central and eastern markets thus giving it a wider footprint.

■ The company has tied up with the VS Lignite for the purchase of 21 MW power every year at a price of Rs 3.3/unit, that is less than Rs 4.2/unit, at which it sources from grid, thus translating into substantial savings for the company.

■ JKLC is increasing its power capacity by 30MW. With the power purchase agreement kicking in and captive power plants coming on stream, JKLC will have surplus power capacity, which it intends to sell on merchant basis.

■ JKLC has been betting high on ready‐mix concrete (RMC) business and, with the softening of interest rates, the management believes that this segment is likely to recover.

■ At the current price of Rs 144, the stock trades at a P/E multiple of 3.1 x FY10E earnings and 3.6 x FY11E earnings. We recommend a “BUY” on the stock with a price target of Rs 199, assuming a P/E multiple of 5 x FY11E earnings, an upside of 38% from the current levels, over a period of 12 months.

To see full report: JK LAKSHMI CEMENT