I have had JK Lakshmi Cement in my portfolio for a while. My logic of buying a cement stock which is a pure commodity and something I usually avoid, is because I keep an eye out on cement dispatches and have made a fair deal in the previous cycle on Gujarat Ambuja and India Cement stocks. My experience has been that if you can buy into cement companies when they are really really cheap and no one fancies them, you can make a 5-10 bagger in a 3-4 year cycle.
With this in mind, I had bought in JK Lakshmi Cement, as it was one of the most attractively priced, that I found. The company has announced its Q3 results and it has been excellent. Net sales has increased from 315 cr to 440 cr (39.5% growth). Net profit has increased from 4.6 cr to 49.2 cr (970.4% growth). EPS has increased from 0.4 cr to 4 cr (900% growth). Dispatches have had a healthy 12.8% yoy growth to 1.22mn tonnes and strong realization growth of 26.3% yoy to Rs. 3,359/tonne.
The management has announced an equity share buyback up to an amount of Rs 97.5cr at a maximum price of Rs 70 per share. Assuming that entire buyback happens at the price range of Rs 65-70, the paid-up equity will reduce by somewhere around 7-8%. Currently, the stock is available at a P/B of 0.7 and EV/ton of $54 both of which are at a discount to its peers.
The stock has moved up sharply in the last few weeks,from a low of 40 in the end of Dec'11 to its current price of nearly 62. The stock is still available at a reasonably cheap price and can move up significantly from here in the next 1 year. I would not be surprised if I see a triple digit price in the next 6 months.
Note: I am invested in JK Lakshmi Cement. Please take my views as biased. Consult with your financial adviser before investing.