India Cement - Subdued quarter; FY14 to be better - Anand Rathi

Revenue growth led by higher realisations. In 4QFY13, we expect our cement coverage universe to post 8% aggregate revenue growth ( 15% qoq), led by 7% yoy realisation growth (slipping 1% qoq). Aggregate volume growth is expected to be up 1% yoy (16% qoq), partly due to the high-base effect (9% yoy growth in 4QFY12). With this, volumes in FY13 are expected to have grown around 5%.

EBITDA margins to dip 400bps yoy. We expect EBITDA margins to fall 400bps yoy (up 160bps qoq), leading to a 12% yoy EBITDA dip (up 25% qoq). Average EBITDA/ton is expected at Rs. 860 (Rs. 980 in the year-ago quarter and Rs. 790 in the previous quarter). Higher freight costs (diesel hike, rail freight increase) and lower volumes would negate gains from higher cement prices.

PAT to dip 16% yoy. Aggregate PAT is expected to be down 16% yoy (up 30% qoq). Shree/Madras in large caps could outperform with 175%/4% yoy PAT increase, while ACC/Ambuja/Ultratech Cements may underperform with 16%/28%/17% yoy dips. In diversified, Grasim and JPA are expected to post 28% and 47% yoy decline in PAT, respectively.

Our take. We expect 4QFY13 sales growth rate of our cement coverage universe at 8% yoy, lower than the 16% clocked in 9MFY13. EBITDA could decline 12% yoy vs 23% growth in 9MFY13, while PAT is expected to decline 16% yoy vs 27% growth in 9MFY13. Expansion plans and cement price outlook are key monitorables. Key positives: (1) Upswing in utilisation rates, led by limited capacity additions; (2) better pricing power; and (3) modest cost rises. We view the recent correction as opportunities to accumulate. Top picks: ACC, Shree, JK Cement.

Source : Equity Bulls

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