24-03-2012, 12:37 PM
JK Lakshmi Cement limited
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JK Lakshmi Cement (JKLC) is a part of the JK group (Hari Shankar
Singhania) which is in to Tyres (JK Tyre), Paper (JK Paper), Sugar etc.
The company mainly operates in the Western and Northern areas of
India. JKLC commenced cement production in the year 1982 at Sirohi,
Rajasthan & last year, it also started production from its second plant at
Kalol, Gujarat. With the addition of this new plant, its total cement
manufacturing capacity now stands at 4.75 MTPA. JKLC also produces
Ready Mix Concrete (RMC) and Plaster of Paris (PoP). It has a captive
power plant of 36 MW at Sirohi. JKLC has more than 2,000 dealers in its
target markets. Approximate State-wise Sales Break-up is as under:
Valuation
JKLC trades at a substantial discount to its replacement cost and to its
competitors. We believe that replacement cost is the best metric to value
a cyclical business like cement. We conservatively value the company at
$70/ton (at a 30% discount to its replacement cost) which translates to a
stock price of Rs. 210.
Reduction in Power Costs
Due to improved efficiencies and higher capacity utilization (fewer plant
stoppages), JKLC has been able to bring down its power consumption on a
per ton basis. Additionally, JKLC has set up a 36MW captive power plant
which provides electricity at a considerably lower rate than what is available
from the state grid. Hence, the savings on overall power costs have been
significant in improving the bottom line of the company.
Greenfield Plant at Durg, Chhattisgarh
JKLC is setting up a new 2.75 MTPA greenfield plant at Durg, Chhattisgarh.
This plant is expected to complete by FY 2013 at a cost of Rs. 11,000 mn. The
Durg region has adequate limestone reserves and the new unit will allow
JKLC to tap the Central and Eastern markets of the country. Currently, the
company is in the process of acquiring land for the project and has already
acquired 40% of the required land.
Fuel :
JKLC uses pet-coke instead of coal as fuel in the firing stage to manufacture
cement clinkers. Even though pet-coke is costlier than coal, it has a higher
calorific value which reduces the quantity of fuel consumed. The company
mainly sources pet-coke from the nearby Reliance Industries Limited (RIL)
refinery at Jamnagar which helps in reducing transportation cost. JKLC had
entered into forward contracts with RIL for the supply of pet-coke at cheaper
rates in January 2009. At that time, prices of pet coke had corrected from a
peak of Rs.8,200/tonne in August 2008 to around Rs.3,800/tonne. Under
these contracts, JKLC will continue to get pet-coke from RIL till October 2009.
Last year, JKLC has started using Bio-fuels along with regular fuel. Going
ahead, this will further decrease the overall cost of fuel.
Power :
As mentioned earlier, JKLC will be able to reduce its power cost in the near
future by using power contracted from V.S. Lignite. (starting from October
2009). Additionally, both the new captive plants (thermal and waste heat
recovery), which are being constructed at the existing site at Sirohi, are
expected to be commissioned by March 2011. This will further reduce the cost
of power for JKLC.