JK Lakshmi Cement

JK Lakshmi Cement's performance for the March 10 quarter was adversely affected by a rise in other expenditure, which, on a per tonne, rose 42.9% Y-o-Y to Rs 499.5. JK Lakshmi Cement is focused on the northern region. Senior company officials highlighted that the company had purchased clinkers from external sources.

   As a result, the company's operating profit margin declined 755 basis points Y-o-Y to 23.2% in the quarter under review, while its net sales rose 21.1% to Rs 441.3 crore. The results were declared after the close of trading on Monday. And on Tuesday, the stock declined 1.6% to Rs 64.8. Moreover, over the past three months, the stock has under-performed the broader market. It has declined 11.2% during this period compared to a 1.3% rise in the Sensex.

   The company's realisations were broadly flat on a Y-o-Y basis at Rs 3,134 per tonne in the fourth quarter. And according to senior company officials, while prices have improved on a sequential basis, they were still flat on a Y-o-Y basis. In contrast, in southern and western regions, players grappled with a fall in realisations on a per tonne basis in the fourth quarter.

   Meanwhile, the company's total cement sales volume grew nearly 21% to 14.08 lakh tonne in the quarter under review, helped by expanded capacities brought on stream earlier. To the company credit, it attempted to offset the difficult operating environment with its power & fuel costs that declined nearly 9% on a per tonne basis in the quarter. Nevertheless, the company's net profit after tax (PAT) also declined 32.7% Y-o-Y to Rs 70.1 crore in the fourth quarter.

   Going forward, demand in the North is expected to remain strong in the medium-term, given government funded infrastructure projects, coupled with a rising demand from the housing sector. Also, the company's ability to keep a check on operational costs, going forward, would be key. At Rs 64.8, the stock trades at just 3.3 times on a trailing four-quarter basis and appears reasonable valued.