Co Reports Rs 21-Cr Net Loss In Sept, But Increasing Demand Gives Room For Optimism
JK CEMENT, which is focused on northern India and Karnataka markets, has seen some investor interest over the past three months, despite a rather lacklustre performance in the September 2010 quarter. At Monday's close of Rs 170.8, the stock has gained nearly 11% during the quarter compared with a 14.9% rise in the broader market.
And that's because of expectations of a pick-up in cement demand in the post-monsoon, given strong economic activity in the country and pick-up in housing demand. In addition, media reports indicate that cement prices have risen sharply in several parts of the country.
For instance, in New Delhi, cement prices are currently at Rs 220 per bag levels, a rise of 15 % from three months earlier, as per estimates. Also, in key southern markets, like Bengalaru, prices are at Rs 235 per bag, a rise of 27 % during this period. This in turn should help to bring a turnaround in the company's performance, going forward, and also help it overcome rising input costs, like freight and power & fuel costs.
However, cement demand across the country in the first half of current financial year had grown barely 5% year –on – year, considerably slower than the growth reported during the earlier financial years. The country witnessed near record monsoon in different parts of the country this year and it adversely affected demand from user industries, like construction.
Meanwhile, during the September 10 quarter, JK Cement's operating profit margin fell by nearly four-fifth compared to a year earlier to 4.7% in the quarter under review. Its net sales also fell marginally to Rs 434.9 crore in the second quarter.
For JK Cement, its realisations declined an estimated 2.2% yearon-year to Rs 2258 per tonne in the second quarter. Its dispatches had grown marginally year-on-year to 1.92 million tonnes in the quarter. For an all-India player ACC, its realisations also declined nearly 13.8% year-on-year on a per tonne basis in the September 10 quarter.
Apart from weak realisations, JK Cement also grappled with higher costs, like power & fuel that increased nearly 23.4% y-o-y on a per tonne basis to Rs 574 in the second quarter. The company also reported a net loss of Rs 20.8 crore in the September 10 quarter compared to a net profit of Rs 65.4 crore a year earlier.
Going forward, managing a rising cost structure remains a challenge for the company. At Rs 170.8 per share, JK Cement trades at 12 times on a trailing four-quarter basis, and is rather expensive.
