J K Cement

• A leading grey cement producer in Nimbahera, Rajasthan India the company is also the second largest manufacturer of white cement in India, with an annual capacity of 4,00,000 tones, and value-added building products, such as wall putty.

• J.K. Cement was the first Company to install a captive power plant in the year 1987 at Bamania, Rajasthan. J.K Cement is also the first cement Company to install a waste heat recovery power plant to take care of the need of green power. 

• J K cement is also the second largest producer of wall putty in the country with an annual installed capacity of 300,000 tones.

Ratio Analysis (LIQIDITY RATIOS):

Year Mar '13 Mar '12 Mar '11 Mar '10

Current Ratio=Curr. A/Curr. L 1.186392 1.19731 1.36792 1.14475

Quick Ratio=(Curr. A-Inv.)/Curr. L 0.7522583 0.83326 0.91699 0.76477

Cash Ratio=(Cash+mkt. Sec)/Curr. L 0.312827 0.06909 0.10547 0.12579

Net Working Capital Ratio 0.7905205 0.81555 0.61425 0.55231

Interval Measure Days 67.477488 27.0231 23.1646 35.2093

Interval Measure Month 2.2492496 0.90077 0.77215 1.17364

Interval Measure Quarter 0.7497499 0.30026 0.25738 0.39121

Interval Measure Half Year 0.3748749 0.15013 0.12869 0.19561

• Current ratio for last four years has been average of 1.19 which is

good as assets are more than liabilities. For a manufacturing

company 2:1 is ideal ratio so still to improve.

• Quick Ratio has been kept around 0.8 for last few years at lower

than ‘1’ so that the company may really be prospering and paying

its current obligation in time if it has been turning over its

inventories efficiently.

• Interval Measure in 2013 it has been increased to 67 from average

of 25 days means it has increased its assets to finance its operation

for 67 days without outside help which is a good sign.

• Net Working Capital Ratio lower the ratio around 0.7 it shows the

higher the ratio, grater ability to meet current liability comparing

other firms.

Ratio Analysis (LIQIDITY RATIOS):

Year Mar '13 Mar '12 Mar '11 Mar '10

Gross Profit Ratio=(Sales-COGS)/Sales 1.2469711 1.25461 1.25583 1.23792

Net Profit Ratio=PAT/Net sales 0.0802037 0.06968 0.02712 0.11007

Operating Profit Ratio=Op. Profit/Net Sales 0.1923172 0.204 0.11305 0.2155Return of Capital employed = EBIT(1-T)/D+E 0.146792003 0.14212 0.076283 0.140455

Return on Investment = EBIT(1-T)/TA 0.0822597 0.06799 0.02356 0.09509

Earning Per Share 33.4 25.36 9.16 32.32

Dividend Per Share 21.71 12.68 1.832 19.392

Divident Payout Ratio 0.65 0.5 0.2 0.6

Retantion Ratio 0.35 0.5 0.8 0.4

Return On Equity 0.1891342 0.17947 0.08947 0.20935

Ratio Analysis (PROFITABILITY RATIO):

Ratio Analysis (PROFITABILITY RATIO):

Gross Margin is high around 59% is an indicator of efficiency with

which management is able to produce each unit because they are

maintaining the competitive price.

Net profit Margin is very low compared to gross. It is because high

debt and interest payment.

Return on investment has increased in 2012 and 2013 but still 8-9%

is not a very good return as a manufacturing firm industry average is

13-14%. Interest burden has been headache for cement industry.

Dividend pay-out ratio is kept high in 2011 in crises company retained

most of the earning part else more than half has been paid.

Shareholders are getting good return around 17+% from last 2 years.

Year Mar '13 Mar '12 Mar '11 Mar '10

Inventory Turnover Ratio6.9496609 6.98087 8.65921 9.99015

Days of inventory Holding 51.80108869

51.56948

41.57424

36.03548

Raw Material Turnover Ratio 1.520971597

1.452565

1.575886

1.710609

WIP turnover Ratio20.5850644

14.53416

7.828881

9.385121

Ratio Analysis (ACTIVITY RATIO):

Ratio Analysis (ACTIVITY RATIO):

Inventory turnover ratio has been decreasing from last four years for 2013 it is almost 7 times a year which is somewhat less the industry average of 8.5 accordingly inventory holding period has also increased which needs improvement, but other reason can be they have increased their production in consecutive years.

Raw material turnover ratio & WIP turnover Ratio are constant over the few years that mean their production process has been working at desirable expectation but selling is less compared to production. However WIP turnover Ratio has been increased phenomenally that can be the reason of less sells compared to fast production.

Ratio Analysis (LEVERAGE RATIOS & VALUE RATIOS):

LEVERAGE RATIOS Mar '13 Mar '12 Mar '11 Mar '10

Debt Equity Ratio=TD/equity0.6726739 0.70591 0.94289 0.75563

Fixed Asset Ratio= Fixed A./CE0.8485436 1.00092 0.96149 1.01288

Interest Coverage Ratio=EBIT/Int.3.4360606 2.97991 1.53878 5.39032

Debt to capital Ratio = D/E+D0.4021548 0.4138 0.4853 0.43041

Debt to asset =TD/Total Asset 0.4021548 0.4138 0.48531 0.43041

VALUE RATIO Mar '13 Mar '12 Mar '11 Mar '10

Price To Earn Ratio7.9041916 6.66404 15.2347 5.5229

Market to Book Ratio 7.6051446 6.41149 5.95309 8.01874

Tobin's Q0.65021337

10.45306

90.35900

20.52518

3

Debt to Equity Ratio compared to cement industry d/e ratio is kept at 0.8 which can be called very well; in case of urgency company can raise loan, same in case of Debt to Capital Ratio.

Interest converge ratio is 3.4 rupee last year which is also good firm is able to meet the Interest obligations.

Ratio Analysis (LEVERAGE RATIOS):

(VALUE RATIOS):• M/B ratio is always 6+ over the time. A company with a very

high share price relative to its asset value, on the other hand, is likely to be one that has been earning a very high return on its assets.

• Q ratio < 1 over the time means the stock is undervalued. • P/E Ratio is 7 in 2013; Investors in the stock are willing to

pay 7rp for every 1rp of earnings that the company generates. However, this is a far too simplistic way of viewing the P/E because it fails to take into account the company's growth prospects. 

IPO The company, a leading grey cement producer in Northern India,

had entered the capital market in 2005 with a public issue shares at a price band of Rs 145 to Rs 155.

The issue opened on February 21 and close on February 24, 2005 and subscribed 1.8 times.

At the issue price of Rs 148, the company mobilized Rs 296 crore. Stock started trading in BSE on 14 Sept, 2005. Opened at 151 Rp

and gave the around % return to investors. In two years of listing price highest went up to 191Rp in May,

2006. and came back to 149 Rp after two year. Today’s price of stock 187.25.

Share price

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BSE

Beta = 0.56

All Time High:24dec,2012 (375)

All time low:2 March,2009 (35.35)

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NSEBeta = 0.72

Dividend 15-Jul-136.50

Dividend

23-Jul-125.00

Dividend

18-Jul-112.00

Dividend

16-Jul-103.50

Dividend

11-Nov-092.50

Dividend

20-Jul-093.50

Dividend

SUBSTANTIAL GROTH

SUBSTANTIALGROTH

Year Mar '13 Mar '12 Mar '11 Mar '10

Growth = (ROCE + D/E(ROCE-i(1-T)))* RR 6.62% 8.97% 7.16% 8.37%

FUNDS REQUIREMENTS

FUNDS REQUIREMENTS

Year Mar '13 Mar '14    

Net Fixed Asset 341.07 341.07   

Total Current Assets 909.11 909.11   

Net profit Margin 6.97% 6.97%   

   

Year 2014 2015  

expexted sales groth 12.14% 12.01%  

expexted sales 3757.418 4208.85  fund req = T.CA(s1-s0)/s0 + FA(s1-sFC)/sFC -L0(s1-s0)/s0-NPM*RR*s1 -63.77795 100.6932   

* Assuming Full capacity utilization in current year

* Keeping same Profit margin and Retention ratio for net year

COST OF CAPITAL

COST OF CAPITALCurrent cost of capital    

Rf 7%(taken)

beta 0.564736(calculated)

Market return 13.13%(calculated)

Cost of equity (Ke)(as per CAPM) 10.51406% 

cost of debt(Kd)(after tax) 8.38% 

Cost of capital= ke*e/d+e + kd*d/d+e 9.66% 

     

Change in debt/Equity ratio -10.00% 10%

d/e ratio 0.6054065 0.739941

Cost of capital= ke*e/d+e + kd*d/d+e 41.34% 39.31%