Date:15/09/2005 URL: http://www.thehindubusinessline.com/2005/09/15/stories/2005091503051500.htm

Back JK Corp's new avatar valued afresh

Jayanta Mallick

Kolkata , Sept. 14

JK Corp, in its proposed new avatar as JK Lakshmi Cement Ltd, a pure cement player after restructuring, is being valued afresh by the market.

The stock on Tuesday moved up by 2.66 per cent to close at Rs 79 after creating its new 52-week high at Rs 82. It also logged a substantial increase in the traded quantity. On the BSE, the traded volume in the counter was 4.11 lakh shares against the two-week average daily quantity of 2.81 lakh shares.

The company is in the process of de-merging and transferring its investment division to a group NBFC and has exited the loss-making magnetic tape business recently. Apart from entitlement of one share of the investment company for every 10 shares of JK Corp shares held, the company's cement business, which is running at more than 100 per cent capacity utilisation, isattracting market attention.

According to Mr Rajesh Agarwal of CD Equisearch, the market has taken cognisance of the company's ability to scale up it capacity utilisation. Though its plant has an installed capacity of 2.4 million tonnes per annum (mtpa), it is currently producing around 3 mtpa. "In terms of replacement cost, the thumb rule valuation of 3-mtpa capacity is around Rs 1,500 crore. After adjustment of the total borrowing of Rs 697.53 crore, there is an excess of around Rs 800 crore. However, the market capitalisation at today's closing price stands at Rs 435 crore," he observed. The market capitalisation to sales ratio stands favourably at 0.8. Mr Mathew Easow, a market analyst, said that though the stock has run up, there is still room for upward movement, considering the business and debt restructuring process the company has gone through. It has reduced its interest cost substantially following a debt restructuring plan, which took effect on September 30, 2003.

The company`s equity is at Rs 49.76 crore and the enterprise value to tonnage ratio is at $99, which compares favourably with Birla Corp's $112, India Cement and Madras Cement at $89 each, Prism Cement at $117, Ultra Tech at $99 and Mangalam Cement at $56, said Mr Nandish Shah of Anagram Stockbroking.

According to a fund manager, the construction and infrastructure activity in North India, where JK's plant is located, is poised to scale up cement prices shortly. "The forthcoming Commonwealth games, roads and other construction projects are likely to keep the cement prices buoyant and increase the profitability of the manufacturers for the next few years," he added.