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India Cements,
RECO : HOLD TP : Rs98
Investment Rationale
§ Though prices in ICL’s southern markets have been hiked in the recent months, the demand growth has been
disappointing, led by slower execution and delay in project allocations. This along with over capacity in southern
region poses higher concern for volume growth
§ Though the recent hikes in cement prices cushion the increasing costs to some extent , the lower capacity
utilization levels due to weak demand pick up still remains a major concern
§ ICL has among the highest exposure to coal imports (65% procured from international markets). With coal prices
almost doubling to USD123 levels in March2011 as compared to the lows of USD68 in April 2010, we believe
these high P&F costs would continue to impact margins
Valuations
§ ICL’s RoCE (6.5% for FY12) and RoE (4.6% for FY12) are nowhere close to the cost of capital, clearly
suggesting destruction of shareholder value. At Current Levels,ICL trades at PER of 17.8X, EV/ton of USD61
and EV/EBITDA of 7.5X for its FY12E nos. These valuations leave limited upside.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Cements,
RECO : HOLD TP : Rs98
Investment Rationale
§ Though prices in ICL’s southern markets have been hiked in the recent months, the demand growth has been
disappointing, led by slower execution and delay in project allocations. This along with over capacity in southern
region poses higher concern for volume growth
§ Though the recent hikes in cement prices cushion the increasing costs to some extent , the lower capacity
utilization levels due to weak demand pick up still remains a major concern
§ ICL has among the highest exposure to coal imports (65% procured from international markets). With coal prices
almost doubling to USD123 levels in March2011 as compared to the lows of USD68 in April 2010, we believe
these high P&F costs would continue to impact margins
Valuations
§ ICL’s RoCE (6.5% for FY12) and RoE (4.6% for FY12) are nowhere close to the cost of capital, clearly
suggesting destruction of shareholder value. At Current Levels,ICL trades at PER of 17.8X, EV/ton of USD61
and EV/EBITDA of 7.5X for its FY12E nos. These valuations leave limited upside.
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