India Cements - Rating: Sell; Target price: Rs38 - Centrum

We expect 1.4% YoY decline in net sales to Rs10.7bn primarily driven by 2.7% YoY decline in realization to Rs4,295/tonne. Sales volume is expected to decline 0.5% YoY to 2.4mt.

EBITDA is expected to decline 32.2% YoY to Rs1.3bn driven by fall in realization, lower sales volume and higher operating costs. EBITDA margin is expected to be at 12.2% against 17.8% in Q3FY13.

Blended EBITDA/tonne is expected to be Rs544 vs. Rs798 in Q3FY13 and Rs523 in Q2FY14.

We expect adjusted loss for the company to be at Rs100mn against profit of Rs335mn in Q3FY13 and adjusted loss of Rs36mn in Q2FY13.

Earnings and target price revised downwards: We have revised realization assumptions downwards by 1.8%/1.3%/0.8% for FY14E/FY15E/FY16E due to lower cement price in Andhra Pradesh. Considering lower realization estimates our EBITDA estimates is getting revised downwards by 12%/7.6%/7.6% for FY14E/FY15E/FY16E. We maintain Sell rating on the stock with a revised price target of Rs38 (earlier: Rs40), downside of 36.8% from the CMP.

Source : Equity Bulls

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