Hold India Cements - Another Hammering - PINC Result Review

Another Hammering

Poor realisations in South Indian markets took a toll on India Cements (ICEM) Q2FY11 performance with the company posting a loss after a gap of five years. Margins at 3.6% were below our estimate of 7.8% as cost pressures further added to the misery of lower realisations. A forex gain of Rs113mn helped the company post a reduced loss of Rs336mn against our estimated loss of Rs275mn.

Outlook: We have reduced our volume estimates for ICEM by 6% to 11.8mn mt. Although prices have significantly improved from Q2FY10 levels, considering the cost pressures we have reduced our margin estimates for FY11 by 280bps to 14.6%. Hence our revised earnings estimate for FY11 and FY12 are lower by 36% and 15% to Rs5.0 and Rs9.8 respectively.

VALUATIONS AND RECOMMENDATION

We maintain our 'HOLD' recommendation on the stock with a price target of Rs103 valuing the FY12 capacity at 35% discount to the replacement cost of USD115/mt.

Source : Equity Bulls

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