India Cements - 1QFY2013 Result Update - Angel Broking

India Cements (ICEM) posted a 13.2% yoy growth in its standalone net revenue to Rs.1,201cr, which was slightly above our estimates. The top-line growth was mainly driven by a 6.9% yoy improvement in cement realization. IPL franchise revenues too rose by a healthy 44% yoy to Rs.122cr. The net profit fell by 39% yoy to Rs.62cr. During the quarter the company had Rs.20cr of exceptional items related to the IPL franchise and Rs.25cr of forex loss which dragged down the profits. Adjusted for the exceptional items, the PAT was down by 10% on a y-o-y basis.

OPM up by a marginal 27bp yoy: Cement volumes grew by a marginal 3.2% yoy. The management indicated that it had to forego volume growth to maintain realization levels. Despite the better realization, the OPM rose by a modest 27bp yoy due to increase in freight and power & fuel costs. Per tonne freight costs rose by ~20% on account of a higher diesel cost, fare hike by railways and higher lead distance. Power and fuel costs were higher on account of power tariff hikes in Andhra Pradesh and Tamil Nadu.

Outlook and valuation: We expect ICEM to post a bottom-line CAGR of 14.2% over FY2012-14E. The company's return ratios would remain subdued due to substantial investments in subsidiaries. At the current market price, though the stock is trading at low valuations of EV/tonne of US$62 on FY2014E capacity, we believe this is justified considering the company's unfavorable locational presence. Hence, we maintain our Neutral recommendation on the stock.

Source : Equity Bulls

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