JK Lakshmi Cement
hosted a conference call on July 28, 2023. In the conference call the company
was represented by Mr Arun Kumar Shukla-President & Director and
Mr Sudhir Bidakar-CFO.
Key takeaways of the call
Clinker capacity
utilization stood at 97% and cement capacity utilization stood at 85% in
Q1FY2024 on a standalone basis.
Revenues of the
company grew by 4.6% YoY on consolidated basis. The management said that it
could have done better with respect to volumes; operating cost has improved but
could have been better and employee expenditure which was higher than the peers
and is the area where it could have been performed better.
Volumes were impacted
due to unseasonal rains in Gujarat and Rajasthan. Operating cost was impacted
in the quarter due to break down of one WHRS resulting in power cost impact.
Power and fuel cost
was in line with industry and there is further scope for improvement.
Growth in Eastern
region for the company was not there as the company did not have clarity on
railway sliding. However, the company has got approval for railway sliding and
this will help the company to reach out to higher realization regions in next
9-12 months.
On standalone basis of
the total revenue of Rs 1633 cr, non-cement sale stood at Rs 133 cr. Of the non-cement
sales Rs 63 cr was RMC sales. Non cement sales margin stood at 4% in Q1FY2024
when compared to 5% in Q4FY2023.
Clinker production at
standalone basis stood at 16.65 lac ton and at Udaipur Cement stood at 3.88
lac ton in Q1FY2023
Trade sales stood at
55% in Q1FY2024.
Rail mix: The company is very heavy on road with 90% being road and 10% being
rail.
Lead distance:Lead distance for the company stood at 430 kms
in Q1FY2024.
Fuel cost stood at Rs
2.23 per Kcal in Q1FY2024 and the same stood at Rs 2.42 per K cal in Q4FY2023.
The company expects the same to reduce to 2.15 per k cal in Q2FY2024.
Fuel mix: coal
constituted 40%, petcoke 43% and the balance from others including biomass.
Inventory: The company
has fuel inventory which will last for 100 days.
Debt: The company had debt of Rs 770 cr and cash balance of Rs 900 cr on
standalone basis and Rs 1950 cr debt and
cash balance of Rs 950 cr on consolidated basis as of June.
At peak debt the
company will be comfortable at 3.5-4x Debt/EBITDA. But the company will be fine
for few years if the ratio crosses the upper boudry.
Capacity expansion: Capacity of the company will increase to 18
million ton once Udaipur Cement Works expansion is
completed and plans to take it to 30 million ton by 2030.
The company plans to take it through both
brown field and green field expansion.
Inorganic expansion: The company will
continue to evaluate the opportunities and will look at acquisition if it comes
at right value, add synergy to the company and add value.
Valuation will depend on the market which
it caters to.
CAPEX: The company will incur CAPEX of around Rs400 crore in FY2024 of
which Rs 100-115 crore is towards railway sliding. OF this the company has
incurred Rs 50 crore in Q1FY2024.
Tax
rate: The company has Mat credit entitlement. The
same has reduced to Rs 140 cr from earlier Rs 200 cr.The company will graduate
to 25% tax rate in next two years.
Fund raising: The company has passed to
rasie funds to the tune of Rs 2500 cr which is an enabling resolution and the
company can raise the funds in one year time.
Guidance: The company has retained its volume growth of 19% on consolidated
basis for FY2024 and EBITDA per ton of Rs 1000 per ton in next 18 months.
Volume growth will be low in Q2 however
likely to improve from October once
clinker plant at UCW will be commissioned. Volume growth will be driven by
higher utilization and also through tie up with third party grinding unit which the
company has.
Drivers for margin improvement include a)increase
in geo mix towards favorable market mainly North and West and others. It has
increased to 75:25 as against earlier of 70:30. Also in the favorable market
to sell volumes in regions where realization is better; b) increase in premium
product share-the same has increased to 26-27% of trade sales from earlier
21-22% share; company plans to increase in share of blended cement from 66-67%
to 75%; d) lead and other supply chain efficiencies through use of technology
leading to lower lead distance ;e) increase AFR capacity from TFR 4% to 10%
which will be commissioned by Oct and to source 40 MW of Solar Power for its Durg Cement Plant from third party. Power
purchase from solar plant will be at Rs 5 per unit when compared to Rs 7.5 per
unit currently.
Management
Commentary:
Commenting on the Results of the Company,
Mrs. Vinita Singhania, Vice Chairman & Managing Director (VC&MD) of the
Company said “the Operations of the Company during the Quarter were impacted by
unprecedented rain & cyclone Biparjoy in the State of Gujarat &
Rajasthan”.
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