Madras Cements - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, Madras Cements (MC) posted a healthy 25.1% yoy growth in its net profit to Rs.123cr, which was above our estimates. The company posted a highly impressive 21.3% yoy growth on the volume front indicating pick-up in cement demand in its key markets Tamil Nadu and Kerala. Realizations too were higher by 7.3% yoy (up 2.4% qoq). We remain Neutral on the stock.

OPM at 31%, down 98bp yoy: For 1QFY2013 Madras Cements has posted a robust 29.5% yoy growth in its net sales to Rs.989cr, led by higher volumes. The revenue of the cement division rose by 29.5% yoy to Rs.948cr, while the windmill division's revenue stood at Rs.41cr up 27.6% on a y-o-y basis. The OPM for the quarter stood at 31%, down 98bp on a y-o-y basis. It fell despite the higher realization on account of increase in raw material, freight and power costs. The EBITDA/tonne rose by 4.6% yoy and 32.2% qoq to Rs.1,286. During the quarter, the company commissioned its 2mtpa cement plant II at Ariyalur, resulting in interest and depreciation costs going up by 14% yoy and 21.8% yoy respectively.

Outlook and valuation: Going ahead, we expect Madras Cements to post a 10.2% and 5.8% CAGR in its top-line and bottom-line respectively over FY2012-14. At the current market price, the stock is trading at a moderate valuation of US$65 EV/tonne on the current capacity (US$60 on FY2014E capacity). However, considering its unfavorable locational presence and risk of margin pressure, we continue to maintain our Neutral recommendation on the stock.

Source : Equity Bulls

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