Earnings Update - Heidelberg Cements (HEIM IN) - Strong volumes; drive the earnings growth - CSEC Research

Strong volumes; drive the earnings growth

- HCIL's revenue grew by 14.3% YoY to INR 4.5bn on account of increase in sales volume, by 9% YoY to 1.2mt and Net realization increasing by 4.8% YoY at INR 3,745/tn (due to demand recovery in central region). During the quarter, company operated at ~80% utilization Vs All India Industry average less than 70%. Trade and Non-trade mix for central India is ~80:20.

- EBITDA rose by 14% YoY to INR 793mn; EBITDA margins stood at 17.5%. PAT grew by 49% YoY to INR 370mn despite increase in effective tax rate by 31%, on account of reversal of provision for doubtful capital advance to the extent of INR 150.6mn. EBITDA per ton for this quarter stood at INR 654 Vs INR 657 in 4QFY16.

- Total cost per ton stood at INR 3,171/ton up by 5.7% YoY (-4.5% QoQ). Raw material cost fell by 0.2% YoY to INR 781/tn, Power and Fuel cost fell by 3.6% YoY to INR 966/tn due to improved fuel mix and savings from WHRP. Employee cost grew by 1.3% YoY to INR 280/tn and other expenses fell by 6.3% YoY to INR 597/tn. Freight cost grew by 7.8%YoY to INR 552/tn.

Valuation: At CMP the stock trades at EV/EBITDA of 10.1X and 7.9X FY18E&19E respectively. We maintain an Outperformer rating with a target price of INR 145 based on EV/EBITDA multiple of 9XFY2019E. We believe the valuation is justified given expected improvement in margins and an improvement in demand-supply scenario over the next two years.

Risks: Delay in economy turnaround, lower than expected infrastructure spending, adverse movement in coal/pet coke prices.

Shares of HEIDELBERGCEMENT INDIA LTD. was last trading in BSE at Rs.128.75 as compared to the previous close of Rs. 130.75. The total number of shares traded during the day was 12723 in over 171 trades.

The stock hit an intraday high of Rs. 131.7 and intraday low of 128.15. The net turnover during the day was Rs. 1647118.

Source : Equity Bulls

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