Madras Cements - 4QFY2012 Result Update - Angel Broking

For 4QFY2012, Madras Cements (MC) posted 55.5% yoy growth in its net profit to Rs.99cr, which was marginally below our estimates. Net profit growth was aided by 16.8% yoy growth in volumes to 2.13mn tonnes and 13.7% yoy growth in realization to Rs.4,250/tonne. However, on a sequential basis, the company's realization remained flat. We remain Neutral on the stock.

OPM at 21.9%, impacted by higher freight and other expenses: MC registered 32.9% yoy top-line growth to Rs.912cr, driven by 32.8% yoy growth in the cement division's revenue. Revenue of the windmill division rose by 38.7% yoy to Rs.6.7cr. Growth in quarterly volumes was aided by strong volumes posted by the company in March. OPM fell by 288bp yoy to 21.9% due to a steep increase in per tonne freight costs and other expenses (up 28.3% and 52.9% yoy, respectively). Freight costs increased due to higher diesel costs and railway freight rates. Net profit rose by 56% yoy to Rs.99.2cr, aided by higher other income. For the quarter, other income stood at Rs.31cr (vs. 18cr in 4QFY2011).

Outlook and valuation: Going ahead, we expect MC to post an 8.2% and 2.6% CAGR in its top line and bottom line, respectively, over FY2012-14E. At the CMP, the stock is trading at moderate valuations of EV/tonne of US$77 on current capacity (US$53 on FY2014E capacity). However, considering its unfavorable locational presence and risk of margin pressure (if ongoing production discipline in southern India breaks down), we continue to maintain our Neutral recommendation on the stock.

Source : Equity Bulls

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