Maintain Buy on India Cement - Motilal Oswal

INDIA CEMENT 3QFY11: EBITDA in-line, higher interest, tax hits PAT; Volume guidance cut; EPS downgrade

Volumes de-grew 25% QoQ (~26% YoY) to 2.04mt. Realizations at Rs3,665/ton grew 26% QoQ (~21% YoY) benefiting from production discipline in the market.

EBITDA margins improved 12.8pp QoQ (~270bp YoY) to 16.2%, translating into EBITDA/ton of Rs568/ton excl other businesses, v/s Rs85/ton in 2QFY11.

The management indicated that while demand has not recovered, players' production discipline has resulted in continuous price recovery.

It has started operations at its 1.5mt Rajasthan plant, which is in Indo-Zinc Ltd. It plans to increase its stake from 60% to 90%.

We are cutting our estimates for FY12 by 11% to Rs7.1 and FY13 by 7% to Rs8.6, to factor in cut in volume guidance and higher interest cost. We are not yet factoring in any benefit from Indonesian coal mine and CPP units. Maintain Buy with a lower target price (by 10%) of Rs102 (~8x FY12 EV/EBITDA).

Source : Equity Bulls

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