India Cements - Cost efficiencies & de-leveraging critical for re-rating - Emkay

- 4Q EBITDA at Rs1.7bn,-22% yoy below est (Rs2bn). Despite higher volumes (+7% yoy), lower realizations (Rs4209/t, -1% yoy&-3% qoq) dragged cement EBITDA at Rs1.6bn, -26% yoy

- EBITDA/t at Rs572 below est of Rs741 led by lower realizations and higher power & other exp. Higher tariffs in AP keep energy cost elevated. Other exp +23.6% yoy

- Despite recent price hikes in south, pricing scenario still remains weak. Downgrade EBITDA est for FY14E/15E by 8.3%/7.9% despite factoring in energy cost savings

- Though valuations look reasonable, delivery of expected energy efficiencies & B/S de-leveraging critical for stock rerating. Venture in Infra biz could create potential cash flow issues in long term. Retain HOLD

Source : Equity Bulls

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