India Cements - Result Update 1QFY2014 - Angel Broking

India Cements (ICEM) posted a 72.9% yoy decline in bottom-line to Rs. 17cr on account of a huge yoy fall in realization. While net realization fell 8.1% yoy, the decline in the company's net plant realization (NPR) was higher at 10.3% yoy. NPR declined on account of steep price correction in Andhra Pradesh during the quarter. The operating profit is down 31.2% on a yoy basis.

OPM down 769bp yoy: ICEM's Net sales rose by 3.1% yoy to Rs. 1,238cr. Cement sale volumes rose by a healthy 13.5% yoy to 2.65mn tonne, with the company increasing its sales in Maharashtra and Eastern India. However, the NPR fell by 10.3% yoy to Rs. 3,185/tonne. While the IPL franchisee posted a revenue of Rs. 108cr, Shipping and Wind businesses posted a revenue of Rs. 15cr and Rs. 5cr respectively. The company's OPM plunged by 769bp yoy, largely on account of lower cement realization. The IPL business posted an EBITDA of Rs. 33cr during the quarter, while the EBITDA of the Shipping business stood at Rs. 1cr. The bottom-line fell by 73% yoy to Rs. 17cr.

Outlook and valuation: We expect ICEM's return ratios to remain subdued due to substantial investments in subsidiaries. At the current market price, though the stock is trading at a low valuation of EV/tonne of US$50 on FY2015E capacity, we believe the same 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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