India Cements - 4QFY2012 Result Update - Angel Broking

For 4QFY2012, India Cements (ICEM) registered 17.5% yoy growth in its net profit to Rs.65cr, primarily because of superior realization. The company's net plant realization rose by 12.0% yoy to Rs.3,465/tonne. We remain Neutral on the stock.

Higher yoy realization drives up OPM by 137bp yoy: During the quarter, ICEM registered 11.8% yoy growth in its standalone top line to Rs.1,118cr. Top-line growth was driven by higher realization as the company's volumes remained flat at 2.52mn tonnes on a yoy basis (2.53mn tonnes) despite the 9% increase recorded by the southern region, the company's primary market. Higher realization for the quarter offset the increase in power and fuel and freight costs. The company's variable cost per tonne rose by 15% yoy to Rs.2,025. Further, during the quarter, the company's employee costs rose by 37.4% yoy due to provisions for director's remuneration of Rs.11cr and leave salary of Rs.10cr. ICEM's bottom line during the quarter was boosted by Rs.6cr of forex gain and higher other income.

Outlook and valuation: We expect ICEM to post a bottom-line CAGR of 8.6% over FY2012-14E. The company's return ratios would remain subdued due to substantial investments in subsidiaries. At the CMP, though the stock is trading at low valuations of EV/tonne of US$56 on FY2013E capacity, we believe this is justified considering the company's unfavorable locational presence. The southern region is currently facing twin problems of poor demand and excess capacity. Hence, we maintain our Neutral recommendation on the stock.

Source : Equity Bulls

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