Multi Bagger #2 - J K Lakshmi Cements

JK Lakshmi Cement Ltd. has its plants located at Distt. Sirohi, Rajasthan and caters to the Northern and Western parts of India. The company has a capacity of 3.4 million tones.

The company’s plant has been operating at high capacities, this coupled with a successful cost-reduction exercise and an improvement in cement prices, the company has managed to significantly improve its finances during the past 18 months.

The company has also set up a 36 MW thermal power plant at its factory at a cost of Rs.152 crores. The first phase of 18 MW went on stream in March 2007 and the second phase became operational in July – August 07. This would make the plant self sufficient in power and would lead to substantial cost savings for the company.

Primarily a cement focused company, the company has now diversified into a variety of products including Cement (OPC & PPC), Ready Mix Concrete (RMC), which is sold as ‘JK Lakshmi Power Mix Concrete’ and Plaster of Paris, sold as ‘JK Lakshmiplast’.

Conclusion

JK Lakshmi Cement has been on a capacity expansion spree and has expanded its capacity from 2.4 million MT to 3.4 million MT in FY 06-07. The company has undertaken another expansion project which would see its capacity go up from 3.4 million MT to 5.0 million MT by the end of third quarter of FY 08-09.

The company has managed to substantially control costs leading to higher profitability. The company can expect to make greater savings in power cost since its captive power plant has gone operational. The company is betting on Ready Mix Concrete (RMC) business as it believes that the modern method of use of ready mix concrete will replace the conventional method of site mix concrete at a much faster pace.

At its current price of Rs 136, JK Lakshmi Cement trades at a PE ratio of less than 3, both on expected FY 07-08 earnings and cheap valuations when compared with the peer group and looks attractive for investment.