Madras Cements - 2QFY2013 Result Update - Angel Broking

For 2QFY2013, Madras Cements (MC) posted a healthy 19.9% yoy growth in its net profit to Rs.133cr, which was above our estimates. The company posted a highly impressive 10.2% 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 11.5% yoy (up 9.8% qoq). We remain Neutral on the stock.

OPM at 31%, down 117bp yoy: For 2QFY2013 Madras Cements has posted a robust 22.0% yoy growth in its net sales to Rs.999cr, led by both higher volumes and realization. The revenue of the cement division rose by 22.9% yoy to Rs.945cr, while the windmill division's revenue stood at Rs.54cr up 8.8% on a yoy basis. The OPM for the quarter stood at 31%, down 117p on a yoy basis, despite the higher realization on account of increase in raw material and freight costs. The EBITDA/tonne rose by 8.1% yoy and 7.9% qoq to Rs.1,388.

Outlook and valuation: Going ahead, we expect Madras Cements to post an 11.8% and 9.0% CAGR in its top-line and bottom-line respectively over FY2012-14. At the current market price, the stock is trading at a valuation of US$82/tonne on current capacity (US$69 on FY2014E capacity), which we believe is fair considering its unfavorable locational presence. We continue to maintain our Neutral recommendation on the stock.

Source : Equity Bulls

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