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Friday, March 7, 2008

JKLAKSHMI CEMENT : A GOLDEN OPPORTUNITY

The Nifty is down to 4764 at the time of writing this. Can it go down further? Yes, it can. The way I look at the current market scenario is like this. There are two different pockets in the market right now. One pocket consists of the frothy stocks which went up to crazy heights just a couple of months ago, without having any real earnings to justify their price rise. I am talking about stocks like REL, RIIL, Jai Corp, Unitech, JP Assoc, Punj Lloyd, GMR Infra etc. These stocks need to go down further.

Then the second pocket consists of stocks like JKLAKSHMI CEMENT which have gone down on very low volumes purely in sympathy with the overall negative sentiment in the market. They don't deserve to be at such prices. At today's low of 119, JKLAKSHMI is trading at a PE of 2.53. This is incredible for a company of this size and quality of management. JKLAKSHMI's PE is at a huge discount to its peers. The industry average PE used to be in the range of 10-14 which has now shrunk to between 8-12 after the January crash. If I was a Fund Manager I would be going all out to buy this stock in bulk at these prices. Capacity is going to be enhanced from the present 3.5MT to 5MT by October 2008 and to 10MT by 2011. Cement is going to be in demand due to the thrust on building new infrastructure in the country.

Considering all this, I would say that the market is giving a golden opportunity to buy gems like JKLAKSHMI at such throwaway prices.

Cheers!

45 comments:

ashok kumar said...

hi superstar

Fail to understand why this shares is trading at such low PE? Is there any hidden adverse thing which we are not able to see? When market was at top then also it was trading at low PE in comparision to other stocks. Everybody knows that this stock is dirt cheap. Then why agressive buying is not taking place. Can you please tell me about book value of this share. I have bought few at 119/- today.

regards

ashok

Dev said...

Hey Navin,

Thanks for your update. I have been buying this stock in bits and pieces upon your advice and i will surely buy some more today. Please advice where do u see the markets heading ... as i see my portfolio going BLOOD RED...

thanks as always and keep up ur good work !!

Superstar said...

Hi Ashok and Dev,
There are always times when certain stocks are available at dirt cheap levels, simply because the market's focus is not on them. There was a time Adlabs was available at 100 before Anil Ambani picked it up and the stock has zoomed many times since then. Godavari Power was available at sub 100 levels as recently as last year before it went on to see highs of 370. Even after the market crash of January, it is trading in above 200. Prakash industries was available at 20 not too long ago when it was discovered by me. Recently it has seen highs of above 300. All these shares were spotted by me when they were trading at similar dirt cheap levels like JKLAKSHMI is trading at today. There are many more such examples.

The moral of the story is, don't waste too much time in asking the whys of things. Instead, use the golden opportunity provided by time and grab it with both hands.

The book value of JKLAKSHMI as on Year ended 31st March,2007 was 68.17. Based on the expected EPS for this year, the latest Book Value should be over 110.

Dev, the Nifty took support around 4500 during the January crash. I think that should act as the base now. In any case, irrespective of where the Nifty goes, one can safely start picking up good value, high growth, low PE stocks like JKLAKSHMI CEMENT with a long term view.

Cheers!

Sameer said...

Navin, Is JK cement setting up a plant in UAE or JK Lakshmi Cements ? Please clarify. Thanks a tonne

LN said...

dear super star ..

I purchased JKlakshmi good amt. at 170 on your call now it is in red..what is your opinion whether i will b able to recover in 6 months....also what is ur opinion on india glycol and jyoti structure . regards.

shashjpn said...

Hi Superstar,
I had some JKC in avarage of 130 levels.
Please give me some near term targets on this.

sandy said...

Hii Navin Bhai how are u? Onething i wud like to Ask u ABout SAPL. Now the price is 14 Approx.. I have taken 5 thousand shares in 30 rs. shall i buy more to Average the cost.Wats ur View on Sapl.And DCW.


Thanking you
Sandy

plifs said...

Hey Super Star.
Plz guide me on IRB Infra.
Should i hold it or no.

LN said...

dera sup star...some time i think SIP is the best tool for now... going slow and constant...pls tell....

ravindra said...

Hi ,

Can you provide your views on praj industries.

Thanks
Ravindra

manoj kogata said...

Hi,

what i think about CIPLA, MTNL,IDEA, ACC.

Regards
manoj

Superstar said...

Hi In,
If you are prepared to hold on to JK Lakshmi Cement for the next six months to one year, then you should see very good profits. The market is running on sentiment right now, which is quite weak. Therefore, anything you would have bought a few weeks ago would be in red. And I mean any stock. But the bottom is quite near and positive sentiment will surely return. You are right about SIP (Systematic Investment Plan). You can surely start investing in good stocks now.

Hi Sameer,
There is some confusion regarding the reports of the UAE project between JKCement and JKLAKSHMI Cement. Therefore, I've removed that portion from the blog. But irrespective of that, JKLAKSHMI Cement continues to be ONE OF THE BEST BUYS IN THE MARKET right now.

Hi Shashjpn,
It is difficult to give near term targets for anything in the market in the present scenario. But I would think that you would easily more than double your money in JK Lakshmi Cement in the long term (one year). This is a time for long term investing and not a time for short term trading.

Hi Sandy,
I am good. How are you? SAPL again, has fallen with the rest of the market. It's last qtr results too were not very encouraging. So, I would say that unless the results of the next few qtrs improve substantially, it will be wise to exit that stock once it reaches near your cost price. You may average it now around 14 to bring down your cost price.

Hi Ravindra,
Praj is a buy on dips.

Hi Pliffs,
IRB Infra is a new listing and does not have much historical data to go by. So, I am unable to comment authoritatively on it. But if you are in profits in that stock then it would be wise to book your profits.

Hi Manoj,
I definitely like ACC, which I think is undervalued at cmp. Cipla also can be bought on dips but it will be a defensive play only in the current volatile markets. I am neutral on MTNL and Idea at this point in time.

Cheers!

Sameer said...

Navin, What is your latest assessment on Aurobindo Pharma ? Both its rise and fall has been like a meteor !

captrak said...

Hi Superstar,

Please advise about ICICI bank @1193 cmp 867 and Kotak bank @ 856 cmp 610. Should i keep them or book losses and flip to Allahbad bank / Canara bank? Would like to keep long term (1 year) and better profits.

Thanks and Brgds
Rakesh

captrak said...

Hi Superstar,

Please advise about sail, tisco, sesagoa at cmp.

Had brought Shree Lakshmi Cotsyn at your reco, could you please advise the time frame and any upside on this stock?

Thanks

Rakesh

Superstar said...

Hi Sameer,
In volatile markets as we are witnessing these days, Pharma stocks are usually considered defensive stocks. I would reckon that it's prudent to hold Aurobindo for one year at least. I don't see much downside from here.

Hi Rakesh,
Keeping in mind the recent unprecedented sub-prime related losses in ICICI Bank, I think it would be prudent to switch to safer banking stocks like Allahbad Bank, Syndicate Bank. Kotak Bank too you can exit in any rallies, if you want to be with safety now.

Sri Lakhsmi Cotsyn is a good stock in the textile space and it can easily double from here if you have an investment horizon of one year or slightly more .

Steel stocks like the ones you've mentioned can be bought on dips, but keep an eye on international steel prices.

Cheers!

Nagendra said...

Hi Super*,

How are you, I am planning to invest in some of the small caps like Eastern Silk, Jindal Photo and Shri Lakshmi Cotsyn.

Please suggest will it be good to go for these small caps with the current market scenario or let me know whether will it be good to invest in some bigger companies like JKLC and Godrej Ind.

I think Jindal Photo and Eastern Silk needs more marketing because considering there 52 week highs, B/V, PE and EPS these are amazing stocks.

Please give your inputs.

Cheers
Nagendra

Superstar said...

Hi Nagendra,
You can go ahead and buy any of the stocks you've named if you have a long term investment horizon. Many stocks are available very cheap now.

Cheers!

plifs said...

Hello super star .
Hey i just wana ask you one thin that how do you attract so many visitors on your blog!!
Plz teme.I have got a project on blogging and m a bms student from mumbai. Help me out.
Thanks.
Keep blogging.

Superstar said...

Hi Plifs,
I would take your query more as a compliment. :) Thanks.

I started this blog in January last year (2007). Since then it has clocked more than 100,000 unique visits. At one point of time when the market was bullish, this blog was among the top 3 finance blogs in the entire world. I owe the success of this blog to all my friends across the world who come here to share information about the stock markets.

Coming back to your question, I can't pinpoint a single reason for how this blog attracts so many visitors from across the globe. Maybe it's because of a genuine desire to help and share info. I don't know.

Cheers!

Sameer said...

Navin, Would appreciate if you could share your views about the frontline It stocks like Infy, TCS & Satyam. These are the only three stocks i am bleeding big time.

Superstar said...

Hi Sameer,
Everyone and anyone who had invested in the stock markets in the last few months is currently bleeding. You are not the only one. It seems the market is hellbent to go lower. While, the stocks you've asked about can be held for a long term view of one/two years, nothing can be said for the short term. These are crazy times.

Cheers!

Aman said...

Hi Superstar,

I have following stocks

Alps Industries@52
Wire and Wirelss@53
Malwa cotton@100
Gufic bioscience@14.50

Let me know your views on the stocks and how long should i hold

Thanks

Aman

shashjpn said...

Hi superstar,
Please suggest on 'Noida toll bridge', Alok texitles & DCB @CMP for medium to long term view.

Thanks,

Superstar said...

Hi Aman,
You should hold on to Alps Ind and Gufic Bio. In Alps you can see profits and Gufic you can exit near your cost. The other two stocks Malwa and WWIL are no good. Sell them and shift to JKLAKSHMI.

Hi Shashjpn,
Out of the three, I like Alok only. The rest can only be market performers at best.

Cheers!

Aman said...

Dear Superstar,

Thanks for your advice!

Another stock i missed out was Piramyd Retail which is taken over by India bulls Real estate. I have 2500@100. Should i hold. I can hold for 6-12 months if it will give a good return

Thanks again!

Aman

Superstar said...

Hi Aman,
I would have booked my profit in Piramyd Retail if I was in your place. There are much better buys available in the market.

Cheers!

Nagendra said...

Hi Super*,

How are you, well following stocks I purchased and are still going down. Whts goin to happen will the market go down to 14K.

Alps : 200@68
Cybermate : 300@15
EasterSilk : 50@180
Godrej : 25@310
JKL cement : 50@133
JindalPhoto : 50@158
SAPL : 100@27
ShriLakshmi Cotsyn : 50@110

most of these are much below the price you recommended but still they are goin down. Please let me know if some of the above needs to be sold at the CMP or shall I hold.

regards
Nagendra.

Gaurav said...

Hi Superstar

I am wondering about cybermate, why its fallen to such low levels. The PE is less then 2. Is there some serious problem within this company or its just panic ..

I was thinking of averaging it from my purchase of 11. What will u suggest

Secondly, whats your view on Bongaigaon refinery after the merger announcement with Indian oil. Any news in this front on whats the ratio?

abhishek said...

Hi Superstar,

I have following stocks

Torrent Pharma
Blue Bird
Hfcl

Let me know your views on the stocks and i hold for 1 years.

Sivaaa... said...

Boss,
help plz
i am holding 1000 MTNL averaged at 176/share and 1000 IDBI on 120/share.
plz enlighten me as all my funds are stuck...what should be my plan?..hold or sell at losses as MTNL is trading on 100Rs/share and IDBI on 98/share..

plz advice as i am block 100%...

VAP said...

Dear Superstar,
Would you recommend SAPL at current level.
Thanks,
VAP

Sameer said...

Hi Navin, Would appreciate if you could share your views on IDFC. I have 2500 @128 and I am a big believer in its story but i am not too sure as to whether the Standard Chartered MF buy out was a good thing. I think they paid a too much for it. The counter has taken a beating. Thanks ! Cheerio

Superstar said...

Hi Nagendra,
Pls tell me one stock in the entire market which is not going down? Some are falling more and some are falling less. But all are falling. The market has been shaken by an International Bear Cartel. Now all you can do is hold on to your stocks which have good fundamental value, and Pray!

Hi Gaurav,
I hope my above answer to Nagendra answers the first part of your question too. Regarding the amalgamation of Bongai and IOC, only the merger announcement has been made, I am not aware of the ratio. Bongai is a value stock in itself.

Hi Abhishek,
All your stocks are holds at current levels.

Hi Sivaa,
You can hold on to IDBI. MTNL also you can hold on for the time being and exit it in a rally. There are many stocks which can give better appreciation than MTNL.

Hi Vap,
Someone had asked me a similar question on SAPL a few days back when it was at 14 and I had given a go ahead to buy it. It rallied to 17 plus levels after that. Again, it is correcting. It can be a buy on dips.

Hi Sameer,
I would have booked my profits in IDFC had I been in your place. It may be a growth story but price is too much. I would have switched to something with better value.

Cheers!

Raghu said...

Hi Naveen.

Today I read in TOI that the Sensex may breach 11000 levels which means there is still lot of downside left.In such scenario do you think it is a good time to open the positions? I am not talking about value stocks like JKL but some good stocks which have taken the beating along with junk stocks. Though I understand that an optimum PE Ratio for each co varied based on its future prospects can you pls advice as to is there any standard/PE for evaluating Small/ Medium and large scale firms respectively.

Also I have noticed that after a bear phase market gives an excellent returns for the following next 2 -3 years. Is it true or just a co-incident. Just a curiosity question pls.

BIPIN said...

hi Superstar,
can i invest at CMP in Mundra,core Projects,HEG, .Moreover i have invested in Powergrid, Rain Commodities. PL. guide.
bipin.

Bobby said...

Hi Supertar,

Pls advise on Mundra Port , have 60 at average 910/- .
Am still stuck in cybermate , any way its no one's fault. Will hold.

Another thing , The one spot you see in the map in latin america, thats me.So its complete now you have followers in all continents.

Cheers

Bobby said...

Hi Sperstar,

pls advice on TNPL@ 120
Ador Fontech @ 112

Thanks
cheers
Bobby

Superstar said...

Hi Bipin,
Although there are much better buys available in the market today than all of the stocks you have named, I will give you my order of preference. Core, HEG, Powergrid, Mundra, Rain.

Hi Bobby,
Firstly, I thank you for being a regular visitor to this site. When I see the world map counter with all the dots, I feel we are one world.
Cybermate was always a high risk stock. Mundra has gone down because realty/Infra stocks had run far ahead of their fundamentals and needed to correct. You can exit it in rallies and switch to stocks with better value.
Both TNPL and Ador are good value stocks and can be held for long term.

Cheers!

Bobby said...

Hi Superstar,

Thanks for the advise.

Have allahbad bank,dena bank and icici.
You have recommended allahbad bank.
Both dena bank and allahbad bank have simillar valuations..whats your call on Dena bank for long term.
thanks
cheers
bobby

Superstar said...

Hi Bobby,
Even Dena Bank was my own recommendation which I had given around 36 levels approx. six months back. After my recommendation it had a great run. At current price it can be bought for long term.

Cheers!

Bobby said...

Hi Superstar,

Many thanks.

Hoping that you will soon come out with another one of those multibaggers in your next potentiol winners list....
Looking forward to it..

Iam sure there will be smiles on all investors faces today.
Lets hope we see good levels again by the end of this year.

cheers
Bobby

Kurian said...

Hi Super*

Kudos to you
I am a begineer to stock market arena

I find your tips highly useful
I must sya more good tahn other so called researchers on phone

Thanks and keep updating us!

Kurian

Shankar Nath said...

Hi,

I have a couple of observations with JK Lakshmi Cement.

1. I am extremely surprised that the company has not paid anything more than 1 crore rupees of taxes in the last 5 quarters, inspite of a PBT of over 200 crores.

2. Even on the debt servicing front, the company had loans of over 700 crs on Mar-2007. I presume they have not paid back debt because there are capex requirements. Now, 700 crs would have been taken at about 10% which foretells an interest outgo of about 70 crs for the financial year. JK Lakshmi has only paid about 38 crores .. which i find difficult to understand.

Any clues on this??

Warm Regards
Shankar
http://scrip-tures.blogspot.com

Shankar Nath said...

Continuing from ashok kumar's post ... there is another perspective to PE ratio.

The PE ratio is simply the m-cap of the stock to the post tax earnings of the stock.

If we add the element of enterprise value, then it becomes really interesting. I took 2 stocks here .. JK Lakshmi and Birla Corp. JK Lakshmi is at a PE of 2.3 while Birla Corp is at 3.5

The enterprise value of JK Lakshmi is 702 + 717 = 1419 crs. At an estimated EBIT of say, 300 crs ... we have an excellent EV/EBIT of 4.67.

When I compare this with Birla Corp (another low PE cement company) ... I find .. EV (1783 crs), est EBIT (580). Birla's EV/EBIT = 3.08

To put the taxes and interest into perspective .. and reconstructing the numbers ...
PAT of JK Lakshmi should be (300 - (10%*717))*(1-30%) = 160 crores (there is a deviation of 103 crs from the estimated number of FY2008).

Similarly for Birla Corp ... (580 - (10%*240))*(1-30%) = 389 crs (the deviation is just 11 crs from estimated numbers of FY2008).

Now, it is still possible that JK Lakshmi Cement does well, but since I follow the value investing approach to investing .. I try to be skeptical and conservative .. as Graham puts it: there is nothing more important that preserving one's capital :-)

Superstar - request your inputs. Do you think Birla Corp is a better bet than JK Lakshmi?

Warm Regards
Shankar
http://scrip-tures.blogspot.com