Visit http://indiaer.blogspot.com/ for complete details �� ��
India Cements
Price fall impacts profitability; 2HFY11 to offer respite
2QFY11. During the quarter India Cements’ reported loss of `448m,
chiefly owing to realization and cost pressures, paralleled our net profit
and cement EBITDA estimates,. We expect a cement-price-led earnings
recovery in 2HFY11. Profit from the IPL venture is expected to add to
the bottom line. We maintain a Buy, with a target price of `142.
Realizations declined 15.4% yoy and 9.4% qoq to ~`2,910/ton in the
quarter. Cement aggregate volumes dipped 3% yoy and 2% qoq to 2.7m
tons. India Cements booked revenues of `340m from IPL, `113m from
shipping and `56m from wind energy.
EBITDA/ton drops to `87. EBITDA/ton, at `87, fell 92% yoy and
77% qoq, mainly owing to a sharp drop in cement prices in the southern
region. ‘Other expenditure’ rose 38% yoy to ~Rs610/ton and freight
cost rose 21% yoy to Rs700/ton. With higher cement prices in Oct ’10
(up 15-18% over 2QFY11), the company expects EBITDA to improve
from 3QFY11. It aims at 12m-13m tons of cement sales in FY11.
Expansion and Outlook. During the quarter India Cements
commissioned its 1.5m-ton Rajasthan grinding unit. The 100-MW
captive power plants are set to be commissioned in phases in FY12.
Management expects the improved cement prices to sustain through
3QFY11 and demand to pick up in 2HFY11.
Valuation. Our SOTP-based value is `142: cement at `115 (6x FY12
EV/EBITDA) and `27 from the IPL venture. Implied valuation of the
cement business is 9.5x PE and EV/ton of US$80.
No comments:
Post a Comment