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India Cements (Better placed to face the down cycle, BUY):
We met India Cements’s (ICL) management for an update on recent developments in the industry and the company. Key takeaways:
- Demand growth has slowed down in the current year on account of sluggish demand from infrastructure segment.
- Costs have increased sharply and the industry needs to pass on these costs.
- ICL is taking various initiatives to reduce costs. To reduce energy costs, ICL plans to install a 120MW captive power plant. ICL has acquired an Indonesian coal mine to secure supply at a concessional rate.
- ICL is better-placed today compared to the previous down cycle, as reserves and capacity have increased.
- We reiterate our BUY rating on the stock in view of likely improvement in efficiencies from 1HFY12 and attractive valuations from a long-term perspective.
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