J K Lakshmi Cement - A superb Opportunity !!!

The Nifty is down to 4745 at the time of writing this. Can it go down further? Yes, it can. The way I look at the current market scenario is like this. There are two different pockets in the market right now. One pocket consists of the frothy stocks which went up to crazy heights just a couple of months ago, without having any real earnings to justify their price rise. I am talking about stocks like REL, RIIL, Jai Corp, Unitech, JP Assoc, Punj Lloyd, GMR Infra etc. These stocks need to go down further.

Then the second pocket consists of stocks like JKLAKSHMI CEMENT which have gone down on very low volumes purely in sympathy with the overall negative sentiment in the market. They don't deserve to be at such prices. At today's low of 119, JKLAKSHMI is trading at a PE of 2.53. This is incredible for a company of this size and quality of management. JKLAKSHMI's PE is at a huge discount to its peers. The industry average PE used to be in the range of 10-14 which has now shrunk to between 8-12 after the January crash.

If I was a Fund Manager I would be going all out to buy this stock in bulk at these prices. Capacity is going to be enhanced from the present 3.5MT to 5MT by October 2008 and to 10MT by 2011. Cement is going to be in demand due to the thrust on building new infrastructure in the country. Considering all this, I would say that the market is giving a golden opportunity to buy gems like JKLAKSHMI at such throwaway prices.