India Cements - 4QFY2015 Result Update - Angel Broking

For 4QFY2015, India Cements (ICEM)' operating performance has come in in line with our estimates. However the net profit is higher, mainly due to higher other income (on a sequential basis) and lower depreciation during the quarter. The company posted a net profit of Rs. 36.6cr during the quarter vs our estimate of Rs. 17.9cr and vs a net loss of Rs. 30.6cr during the same quarter last year. The topline was below our estimate, mainly due to lower realization. Realization/tonne improved by 19.7% yoy to Rs. 4,805 but was below our estimate of Rs. 4,964.

EBITDA margin jumps 1,090bp yoy: ICEM's top-line fell by 5.1% yoy, impacted by low demand in its key markets which are situated in South India. The company's cement sale volume was down 21% yoy to 2.09mn tonne. Cement realization increased by 19.7% yoy to Rs. 4,805/tonne on account of price hike taken in the south region during the quarter. The OPM improved by 1,090bp on a yoy basis and stood at 17.8% for the quarter on strong realization and decline in operational costs. The company reported an operating profit to Rs. 182.2cr, an increase of 145.6% yoy. The EBITDA/tonne came in at Rs. 870. Higher other income and lower depreciation increased the net profit to Rs. 36.6cr.

Outlook and valuation: ICEM's return ratios have remained subdued over the years due to weak profitability. However, we expect the company's earnings profile to improve going ahead due to better demand and realizations resulting in higher return ratios. We expect revenue to grow at a CAGR of 9.7% and EBIDTA to grow at a CAGR of 24.6% over FY2015-17. At the current market price, the stock trades at 5.5x FY2017 EV/EBIDTA and EV/tonne of $57 on FY2017 blended capacity. We recommend a Buy rating on the stock with a target price of Rs. 132 (9x EV/EBIDTA and EV/tonne of $70).

Shares of INDIA CEMENTS LTD. was last trading in BSE at Rs.82.2 as compared to the previous close of Rs. 82.4. The total number of shares traded during the day was 172945 in over 1314 trades.

The stock hit an intraday high of Rs. 83.6 and intraday low of 81.3. The net turnover during the day was Rs. 14284378.

Source : Equity Bulls

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