Dear All,
Forwarding you the Result Update on India Cements for 4QFY2011 with a Neutral Recommendation.
For 4QFY2011, India Cements (INC) posted 44.3% yoy growth in net profit to `55cr, primarily on account of higher realisations due to the pricing discipline adopted by cement manufacturers in the southern region. However, dispatches fell steeply by ~12.1% yoy because of a decline in demand from the company’s key markets in the south. Andhra Pradesh, the major cement consumer in the south, reported a 17% decline in demand in FY2011 due to continuing political uncertainty in the state. We recommend Neutral on the stock.
OPM up 437bp yoy: For 4QFY2011, INC posted 27.7% yoy top-line growth to `1,000cr primarily due to the 22.6% yoy improvement in net plant realisations (NPR) to `3,050/tonne. On a sequential basis, the company’s dispatches and NPRs rose by 24.9% and 5%, respectively. On the operating front, the margin increased by 437bp yoy to 18.3% on account of superior realisations. However, input costs were higher on a yoy basis, offsetting the improvement in realisation to a considerable extent. Per tonne power and fuel and freight costs were higher by 9.3% yoy and 12.0% yoy, respectively.
Outlook and valuation: Over FY2011–13E, we expect INC to post a 7.7% and 5.5% CAGR in dispatches and realisations, aided by pick-up in demand. Despite reasonably good earnings visibility over the period, return ratios would remain subdued for the company. At the CMP, the stock is trading at EV/EBITDA of 5.6x and EV/tonne of US$ 64 based on FY2013E estimates, which we believe is fair. We recommend Neutral on the stock.
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If you have any further queries, feel free to call us on 022 39357600, Extn: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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