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The last few days has been quite eventful. We had the first meeting of the ValuePickr Kolkata group last Sunday.
I had expected about 10 people when I first thought of this first. We ended up having over 40 participants sign up and 28 showing up on a rain-drenched Sunday morning and stayed on for over 3.5 hrs!!
Some interesting stuff I read:
https://medium.com/@yegg/mental-models-i-find-repeatedly-useful-936f1cc405d#.vvs6mtaqa
Superb collection of mental models in one page
http://thenextweb.com/lifehacks/2016/08/01/989517/
7 mental models you should know for smarter decision making
http://awealthofcommonsense.com/2016/05/lessons-from-losing-big/
Notes from the book What I Learned Losing a Million Dollars.
https://hurricanecapital.wordpress.com/2016/08/02/peter-thiel-on-characteristics-of-monopoly/
Peter Thiel, the billionaire VC, who founded PayPal and now Palantir and also was an early investor in Facebook, has written a book Zero to One where he talks about the attributes of a monopoly. This article summarizes the book and throws in some interesting observations on monopolies.
JK Lakshmi cement is a strong player in North
India with a dominant position in Rajasthan. Other states where the
company has a presence include Haryana, Delhi, Punjab and
Uttarakhand in north. In the west also, the company has a
healthy presence in Gujarat and has made inroads in the Mumbai markets
as well. Sales wise, Gujarat contributes highest at ~35% of sales
while Rajasthan contributes 27%. The contribution from the rest
of the north region is at ~31%. Maharashtra contributes ~7% to topline.
NOTES FROM AR2015-16
Integrated cement plant at Durg started commercial production in
FY2016 and has reached almost full capacity utilization in less than a
year.1.35 MTPA grinding unit at Surat has been commissioned at the end
of FY16 and is in the stabilization phase Total capacity across
locations is 13 MTPAThe company plans to deleverage its balance sheet
before progressing on brown field expansionsTied up with Snapdeal and is
the first company in India to foray into online sellingCo had a
capacity utilization of 82% as against an industry average of 66%The co
continues to be one of the lowest cost producersThe Durg Plant has
performed satisfactorily in the very first full year of its operations
and achieved 104% capacity utilization in the last quarter of FY
2015-16. Company has become a third largest player in Chhattisgarh
market in a short span of time.
NOTES FROM Q1FY17 Concall
Durg plant:
In the quarter, sales from the East plant was 0.5mt
against 0.19mt in Q1FY16. EBITDA has turned positive for the plant in
the quarter primarily led by cost reduction as realization remains weak.
The company is buying power for the plant at Rs6.8/unit from the grid
which is very expensive (CPP generat ion cost is Rs4/unit). In order to
save energy costs, it is in process of commissioning WHRS of 7MW (to be
operational by Sep - 17). However, it will be able to cater to only 30%
of the power requirement of the unit. Hence, the company is also trying
to source power from private source which will be relatively lower than
the grid cost (but not as low as the CPP cost). This is expected result
in cost savings of Rs150/tn. Also, construction of railway siding is
under progress and is expected to be com missioned by the FY18 - end
which may further lead to savings Rs300 - 350/tn. Through these
initiatives, saving of at least Rs300 - 400/tn is expected in the opex
of East plant.
Product and sales mix of East plant :
East plant is currently
producing 75% PPC and 25% OPC+PSC. This plant is currently selling 60%
in Chhattisgarh , 20 - 25% in Orissa and rest in other markets. Larger
exposure to Chhattisgarh market has led to lower realization for this
unit . Thus company’s focus is more on cost saving so that the
profitability can be improved.
Capex update:
The coompany has planned capex for a) Rs150cr for
the capacity expansion at Durg plant from 1.8mt to 2.7mt (expected to
get commissioned by Jun - 17), b) Rs90cr for WHRS unit of 7MW (to be
operational by Sep - 17, c) Rs 100cr for the grinding unit at Orissa
(0.6mt), to be operational by Sep - 17, d) Rs150cr for railway siding at
the Durg plant (expected to get commissioned by FY18 - end ) and e)
Rs20-22 cr left capex for Surat plant (trial run has started).
Additionally , remaining capex for Udaipur plant (1.6mt, expected to get
commissioned by Dec - 16) is Rs200cr.
Sales mix:
Company sells 60% in Chhattisgarh and 20 - 25% in
Orissa form the East plant. From North plant it caters to Gujarat (35%),
Rajasthan (30%), Maharashtr a (5%) and rest to other parts of north
region.
Clinker production:
The company produced 0.34mt clinker in Q1FY17 as compared to 0.20mt/0.3mt for Q1FY16/Q4FY16.
Lead distance:
Lead distance for North /East plants is 450kms
/300kms . The company is planning to take initiatives to reduce the
freight cost in the North region.
Petcoke:
The average petcoke cost for the company in Q1FY16 was
Rs5000/tn, however it has increased to Rs6,500 - 6,600/tn (spot price)
as of now . It uses 90 - 95% petcoke.
Debt and cash level:
As of 30 th June, 2016 , gross debt of the
company stood at Rs1950cr and cash was at Rs450cr. Debt pertaining to
the Udaipur Cement stands at Rs500cr. Cash level has increased from
Rs250cr as of Mar’16 to Rs450cr as of Jun’16.
Growth outlook:
As per the management the North/Gujarat/East
regions grew by 1.0%/2.5%/3.0% in Q1FY17. On account of monsoon season,
the company is not expecting any revival in the demand in Q2FY17,
however, going forward it remains positive on the demand outlook for
2HFY17 and expects demand growth of 7 - 8% growth in this period . This,
as per management, is expected to be driven by government spending on
infrastructure, smart cities, housing for all scheme and rural growth on
the backdrop of good monsoon.
DISCLOSURE: I am invested in the company.