JK Lakshmi Cement's September quarter performance impressive due to growth in dispatch volumes, higher realizations

MUMBAI: A robust growth in dispatch volumes and higher realizations led to an impressive performance of JK Lakshmi Cement in the September quarter. The company's net profits grew by seven times year-on-year in the quarter ending September 2012.

Despite a pick up in monsoon in the September quarter, cement prices did not correct by a significant margin. On a sequential basis, cement prices on an average were lower by just Rs 4 to 5 per bag of 50 kgs. Due to an increased construction activity this year, the company's dispatch volumes increased by 7% y-o-y.

In addition, with prices remaining strong, average realizations grew by a healthy 29% to Rs 4064 per ton. Although higher freight costs negated the benefit from increased realizations, its operating margin still grew by 900 basis points in the September quarter.

JK Lakshmi Cement currently has a capacity of 4.8 million tons (MT), which it intends to expand to 8.1 MT by December 2013. Because of this expansion, the company may grow at the industry average rate of nearly 7% in next few years. At current market price of Rs 126.4, the stock is trading at an Enterprise Value (EV) per ton of $71. This is in line with its mid size peers which are trading at an average EV of $75 per ton.