Rain Commodities - 1QCY12 Results Update - Motilal Oswal

* Rain Commodities' (RCOL) 1QCY12 consolidated adjusted PAT increased 3% QoQ to INR1.8b (v/s our estimate of INR1.6b). Net sales declined 10% QoQ to INR14.6b, in-line with our estimate of INR14.4b. Reported PAT was boosted by forex gain of USD169m (v/s loss of USD294m in 4QCY11).

* EBITDA was flat QoQ at INR3.7b (estimate: INR3.3b) as the carbon business continued to deliver superior margins with calculated EBITDA/ton at USD97 (down 6% QoQ). EBITDA/ton for cement improved 24% QoQ to INR844/ton.

* Total carbon volumes (CPC and pet coke) increased 6% QoQ to 701kt, while cement volumes improved 15% QoQ to 604kt.

* RCOL's gross debt has now come down to USD679m (from USD709m in 4QCY11) on account of reduction in both term debt (USD625m to USD610m) and working capital debt (USD85m to USD69m). Net debt declined by USD79m QoQ to USD463m. Net D/E ratio fell to 1.1x and is expected to decline further to 0.9x by 4QCY12.

* Interest charges declined 13% QoQ to INR582m on account of lower debt levels.

* The company completed the buyback of 10m shares at an aggregate amount of INR319.9m.

* Current valuations are (2x CY12E EPS and 2.8x CY12E EV/EBITDA) are attractive. We believe RCOL's business remains strong and the stock offers superior risk-return ratio. We expect stock to get rerated on further deleveraging. Re-iterate Buy with target price of INR89/share.

Source : Equity Bulls

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