CEMENT SECTOR may call for merger / acquisition

J K Cement started its operations on May 1975 by setting up its first plant at Nimbahera in Rajasthan. An affiliate of J K Organization, which was founded by Lala Kamlapat Singhania, J K Cement is one of the leading manufacturers in the sector of cement manufacturing in North India. Starting with a production capacity of 0.3 million tons, the company has gradually increased its capacity; now the company has the capacity to produce 2.8 million tons. J K Cement is the second largest white cement manufacturer in India in regards to production capacity.

The company has access to huge limestone reserves which is used for manufacturing both grey and white cement. J K cement holds the highest market share in the state of Haryana, commanding over 18% of the total market share. The company's primary market for grey cement is in North India. However white cement has considerable demands in countries like Singapore, Kenya, Bahrain, South Africa, Nepal, Tanzania, Nigeria, Bangladesh, Sri Lanka and UAE.


Company Strengths

J K Cement enjoys certain vital advantages that have helped them in becoming one of the leading names in the field of cement manufacturing in India and abroad. First the company has proximity to huge reserves of premium quality limestone, as essential ingredient for cement manufacturing. Based on certain studies undertaken, it is estimated that the limestone reserves of the company are sufficient to support the planned production capacity for approximately 40 years.

Second the company has an extensive marketing network for grey and white cement both within and outside India. The company's distribution network for grey cement consist of more than 40 feeder depots, serviced by seven regional sales office located at Delhi, Haryana, Uttar Pradesh, Punjab, Gujarat, Madhya Pradesh and Rajasthan. J K cement's white cement distribution network comprises of 20 feeder depots and 13 regional offices. Besides, the company also has a total of more than 4000 retail stores, 22 sales promoters and four handling agents.


J K Cement Production Plants

The company has three major production plants located in the states of Rajasthan and Gujarat. The first plant of J K Cement was set up in Nimbahera, Rajasthan in the year 1975 with an initial capacity of 0.3 million ton per annum. With the incorporation of newer technology and modern equipment, the production capacity was enhanced to 2.8 million ton per annum. Located just 10 kms away from the Nimbahera unit, the Mangrol plant gets major benefits like technical and commercial assistance from the that plant.


The Gotan unit located at Gujarat which manufacturers white cement started production commercially in 1984 with a production capacity of 0.05 million ton per annum. Currently the unit has a capacity utilization of around 75% and an operating profit of 30% consistently. The unit has ISO-9001:2000 QMS, ISO-14001:1998 EMS and OHSAS-18001:2005 recognition.

J K Cement Products

The major products of J K Cement are grey and white cement. The grey cement produced by the company Ordinary Portland cement or OPC and Portland Pozzolana Cement or PCC. The OPC range of products has three grades which are differentiated by their compressive strength, they consist of 43-grade, 53-grade and 33-grade OPC. The cement products are marketed and sold under the brand names of J.K. Cement and Sarvashaktiman for OPC products, J.K. Super for PPC products and J.K. White and Camel for white cement products. Some other products manufactured by the company consist of: J K Wall Putty

Grey Cement J K White Cement  J K Water Proof  J K Cement Technical Experience

J K Cement Company has more than 25 years of experience in the Indian Cement Industry. Owing to this huge experience, the company has the best skills at its disposal for quick expansion of production capacity, maximize production efficiently and reduce the costs. Over the years the company has developed a considerable client base and has earned the distinction of having a strong reputation of quality production. Besides, the company has a reputation of constantly upgrading and efficiently modernizing the production capacities

J K Cement's manufacturing unit at Nimbahera was chosen by the World Bank and the Danish International Development Agency as one of the four training centers in India to serve as the Regional Training Center in North India. The operation of the training center gives the company access to state of art training aids, live working models, and technical expertise developed by well known national and international cement producers.

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J K Lakshmi Cement was established in 1982 and is under the JK Group of companies. J K Lakshmi Cement Ltd is famous for its superior quality products and impressive performance. The company is one of the leading cement producing companies in India.
J K Lakshmi Cement has a manufacturing unit at Jaykaypuram, Rajasthan. The production capacity of this plant is over 3.5 million tons. All the production plants of the company are technologically advanced and make use of state-of-the-art machinery. Most of the company's plants have adopted the latest technology from Fuller International and Blue Circle Industries of USA. The raw material that is used by the J K Lakshmi Cement Company for the manufacture of cement is of the best quality. As a result, the quality of cement that is produced by the company is among the best that is available in the market.

In northern India, J K Lakshmi Cement was the first cement producer to be given the ISO 9002 certification. The company has also been accredited by the NABL (Indian government's department of science and technology) for its management system for lab quality. J K Lakshmi Cement is an important part of projects such as Sardar Sarovar Dam, IGNP, and also of corporations like Reliance, Airports Authority of India, L&T, and Essar.


J K Lakshmi Cement also offers products such as concrete ready mix which is sold under the brand name JK Lakshmi Ready Mix Concrete. It also sells plaster of Paris under the brand name JK Lakshmiplast. The J K Lakshmi Cement Ltd. has a large network of around 1,500 dealers who are mainly distributed across various states such as Gujarat, Rajasthan, Haryana, Delhi, UP, Punjab, HP, and J&K.

J K Lakshmi Cement has become the topmost company in India in the cement sector on the basis of its quality of products. With its emphasis on quality and efficiency and with an ever-growing network of dealers, J K Lakshmi Cement seems poised for tremendous growth in the near future.

ContraPick 01 India Cements

Introduction
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India Cements (BSE 530005 NSE INDIACEM )is one of the well known cement companies in south India was set up in the year 1946.
The first plant of India Cements was built in the year 1949 in the province of Sankarnagar in the state of Tamil Nadu. Over the years the number of plants has been increased to seven which are located in two
state i.,  Andhra Pradesh (Yeramguntla, Chilamkur, Vishnupuram, Malkapur) and Tamil Nadu. (Sankar Nagar, Dalavoi, Sankari)
http://www.indiacements.co.in/

It is the largest producer of cement in the southern part of India with installed capacity of 14 MTPA as on 31 March 2010
http://www.indiacements.co.in/areports/pressrelease.pdf
the company has a market share of around 28% in the states of South India. It has aiming to increase the market share to around 35% over the next few years.
the company has vast limestone resource is optimization of the existing plants.
the company has its regional offices in all the states of South India and also in Maharashtra.and  around 10,000 stockists who distribute products throughout india
http://www.indiacements.co.in/Company%20profile.htm
Sankar Sakthi, Raasi Gold and Coromandel King: are the brands of cement have that high strength in them to meet the requirements of the infrastructure and development sector water resistant even in case of the rainy season. The cost of the brand is also affordable which make them very much preferred by the consumers all over the country.

The paid up equity share capital of the Company has increased to Rs.307.18 crore as on 31st March, 2010 comprising of 30.71 crore equity shares of Rs.10/- each and the book value stand at Rs 113.53 per share
The company has commitment to issue 1.1 crore shares to institutional investors which will make an estimated outstanding equity outstanding at 31.82 crore shares

At current market capitalisation at Rs 3627 crore (considering above shares) CMP Rs 114 the share trades at PE of 10 x forward earning(2010-11) of EPS of Rs 11 per share

India cements trading at discount to its net  intrinsic value Rs 6500 crore  as detailed below

Rs 6350 crore for its 14 MTPA cement capacity at replacment price of Rs 525 crore per MTPA accounting for cross holdings

Rs 990 crore for IPL team (based on floor price of 225 million USD for new team) with a committment of Rs 40 crore a year

Rs 750 crore for other business &investments
Which put a gross valuation of Rs 9090 as reduced by Debt Rs 2590 crore and net valuation of Rs 6500 crore
as against this at current market value of Rs 114 the intrinsic value per share is Rs 204 per share which is a discount of 44 percent
 
consider buying stock at lows based not on earnings but a contra pick on value unlocking

Cement industry in INDIA

India, world's second largest cement producer after China, is the home to a number of top cement companies. As various infrastructure projects, road networks and housing projects are coming up, many of which are backed by the government, the cement industry in India is growing at a great pace these days. With the capacity of 224 Million Tones (MT), the Indian cement industry is truly big in size and hence accommodates a number of cement companies in the market. Not only that, more growth is further expected in the coming years, which will also lead to the growth of top cement companies in India.

The overall capacity increased to 224 million tonnes (MT) as on April 30, 2010, according to the Cement Manufactuer's Association from 151 million tonnes in FY2004-05 translating into a CAGR of 11% YOY. The average capacity utilisation and cement dispatches both maintained a steady growth. Total dispatches recorded 181 million tonnes during 2008-09 against 141 million tonnes in 2005-06.


Most players, large as well as small have expanded their installed capacities in the recent past. There was a capacity addition of 13.51 million tonnes in the last fiscal despite the slowdown. More than 75% of this (9.85 million tonnes) came through Greenfield projects. The remaining 3.66 million tonnes came through Brownfield projects. South India which had consumption of 54.3 million tonnes in the previous (the highest amongst all the four regions in the country) witnessed three Greenfield projects by the Madras cement, Chettinad Cement and Rain Commodities. Each has a capacity of two million tonnes.
The Indian cement industry is largely dominated by a few companies. The top 20 cement companies account for almost 70% of the total cement production of the country. 
 
( the below mentioned text / data is under updation

The cement industry comprises of 125 large cement plants with an installed capacity of 148.28 million tonnes and more than 300 mini cement plants with an estimated capacity of 11.10 million tonnes per annum)

The total cement production the country in FY09 was 210 MT. It is further expected to reach 236.16 MT in FY11 and 262.61 MT in FY12.


Let's have a look at the top 11 cement companies in India.
Name             Installed
                      Capacity
                       MTPA
ACC Limited 18.640
Gujarat Ambuja
Cements Limited  14.86
Ultratech 17.00
Grasim  14.12
India Cements 8.81
JK Cement Ltd 6.68
Jaypee Group 6.53
Century Cement 6.30
Madras Cement 5.46
Birla Corp. 5.11
JK lakshmi Cement Ltd 4.5     )

Even as analysts are sceptical of cement companies’ recent move to raise prices in the South, manufacturers of the commodity feel the hike was needed to trim losses on the back of a slump in sales in the last three months.Several cement makers increased prices by Rs15-30 per 50 kg bag this week. The price in Andhra Pradesh has gone up to Rs175 per bag. In Tamil Nadu and Karnataka, prices have been raised to Rs200-210. In Kerala, though the price hike is yet to take effect, dealers said prices will go up to Rs220-225.

Cement sales generally improve in October and continue to rise till January. With a pause till March, sales tend to improve again till June.
We estimate March-11 exit capacity of 113 mt in south India, with likely demand of 60-65 mt., thus the sustainable of price increases are difficult
It is a fact that the current month (September) always proves to be difficult for cement companies due to the rains. But, unless the companies attempt to hike the price now, it would be difficult to improve realisations during the peak sales season of October-January
The largest cement players in the south, including India Cements, UltraTech and Dalmia Cement, together have a close to 45% share in the market.

Two-fold strategy to keep sales going while maintaining realisations.
One, capacities or supplies can be cut down to sustain the price hike.
Two, a marginal roll back of the price hike is possible in the next couple of weeks to keep the effective hike at Rs10-15 per bag to time the correction with the beginning of the sales season
At present the installed capacity in the South is 91 mtpa whereas the demand is 57 mtpa for FY10.
In FY11, the demand is expected to be 62 mtpa with a capacity installation of 95mtpa. In FY12 it is expected to increase to 109 mtpa installed capacity with a consumption demand of mere 68mtpa.
We expect the utilisation to remain at same level around 60-65% till FY12,” he said. “Approximately 8-10 mtpa was being channelised from the south to both eastern and western markets, which would subside. Post the monsoons, a price hike of Rs5-10 in the West can also happen” Sankhe added.

Cement makers are also not finding the going any attractive, particularly in key markets like Andhra Pradesh, which accounts for about 15-20% of the all India cement sales. The state government, which was driving cement sales by taking up mass housing programmes, has reduced the offtake for about six months now. Similarly, monsoon too has been extremely good postponing the construction activity. The property development in general too has been sluggish in Hyderabad and also in metros like Chennai for the last one year.
As the utilisation rate is expected to be stagnant, analysts do not foresee any reason for price escalation as lower utilisation rate would make it difficult to maintain realisation rate.

source dna