Buy JK Lakshmi Cement - A C Choksi

Expansions plans at JK Lakshmi on track and to increase the volumes going forward.

As part of its expansion strategy, JK Lakshmi Cement will come up with greenfield in Durg, Chattisgarh with a capacity of 2.7 MT. The project is on track and is expected to be operational by October 2013. It's split grinding unit of 0.55 Mn MT at Jhajjar, Haryana became operational in April 2012.

Fuel efficiency to lead to increase in margins.

JKLC has secured long termpower supply with VS Lignite at a cost closer to its captive generation cost. JKLC is a fuel efficient manufacturer, which is expected to lead to an improvement in its margins.

JKLC to reap benefits of exposure to better performing markets and higher capacity utilizations

JKLC with a market share of 2.17%, caters to the Northern(56%) and Western(44%) regions of the country. Gujarat and Rajasthan are the top two markets for JKLC, contributing~60%of the company's total volumes.Buyback announcement at 70 to augment the price and to improve return ratios

The company has announced a Buy-Back plan of equity upto Rs.975 mn. Buyback, if fully done, will improve return ratios of the company.

Valuation

We initiate coverage with a BUY Rating on JK Lakshmi Cement with a target price of Rs.127 , valuing it using EV/Tonne Method.

Source : Equity Bulls

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