Visit http://indiaer.blogspot.com/ for complete details For 2QFY2011, Madras Cements (MAC) posted a 20.4% yoy decline in its top
line to `650cr, which was below our estimates of `692cr. The lacklustre
performance was primarily because of a 22.7% yoy decline in the cement
segment’s revenue to `576cr. Going ahead, we expect the offtake to improve in
the southern region, with cessation of monsoon and improvement in demand
from the housing and infrastructure segments in the southern region. Realisation
is also set to improve post the recent price hikes carried out in the region. We
maintain a Buy rating on the stock.
OPM at 17.7%, down 2,390bp yoy: The company’s top-line declined by 20.4%
yoy as the cement segment, which derives bulk of its revenue from the southern
region, suffered due to low offtake and poor realisation in the region. While the
company’s cement despatches were down by 6% yoy to 1.95mn tonnes,
realisation fell by a steep 16.8% yoy to `2,952/tonne. OPM plunged by a huge
2,390bp yoy to 17.7%, primarily due to fall in cement realisations and a 12.4%
yoy increase in power and fuel costs to `172cr. The bottom line fell by 81.6% yoy
to `31cr, in line with our estimates.
Outlook and valuation: At the CMP, the stock is trading at 6.7x EV/EBITDA based
on FY2012E numbers. We have valued the company’s cement assets at
US $75/tonne and have assigned a value of `4cr/MW to the captive power
plants. We maintain a Buy rating on the stock with a Target Price of `141.
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