India Cements Ltd - GEPL Capital

Q3FY12 – Strong Y-o-Y performance, driven by increase in realisation

- Net sales of India Cements Ltd (ICL) for Q3FY12 grew by 20.5% Y-o-Y driven by sharp increase in realisation and volume for cement.

- EBIDTA margin for Q3FY12 improved by 443bps on a Y-o-Y basis mainly on account of increase in realisation. However on a Q-o-Q basis EBIDTA margin declined by 244bps.

- Net profit rose by 162% Y-o-Y, this was primarily on account of increase in realisation and partly due to carry forward of foreign exchange translation loss amounting to Rs.127.9 mn to “Foreign Exchange Monetary Translation Difference Account” instead of considering it in P&L.

- Considering the same in to P&L, PAT would have shown a growth of 102% Y-o-Y.

Result Highlights

Strong demand in ICL's key markets helped ICL post strong results for Q3FY12. Consumption in ICL's key markets (Southern India) rose by 3.3% as against a negative growth of 4.12% for first six months. Cement consumption for Q3FY12 in Tamil Nadu grew by 18% Y-o-Y, followed by Andhra Pradesh which grew by 12% Y-o-Y. Similarly, Kerala showed a growth of 15% Y-o-Y and Karnataka saw an 8% Y-o-Y growth.

As a result of the strong demand in the region, ICL's sales volume grew by 7% Y-o-Y to 2.18 mn MT. The net plant realisation in Q3FY12 rose by 20% Y-o-Y to Rs.3460/MT. EBIDTA per MT rose to RS 910/MT from Rs.650/MT, showing an increase of 40% Y-o-Y.

On account of the increased use of Imported coal in to raw material mix the average blended cost of coal rose to Rs.6,600/MT in Q3FY12 from Rs.6,310/MT in Q2FY12.

Valuation & Viewpoint

Over last two years EV per MT in US$ has been in the range of US$63-99. At current market price the stock is trading at US$77.8/MT, a 27% discount compared to its last two years high and at 196% discount to its all time high. Given a) the strong pricing trends on account of pricing discipline, b) steady demand over next 4-5 months, and c) stabilization of the CPP, we expect ICL to witness an improvement in margin going forward.

Source : Equity Bulls

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