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EARNINGS REVIEW
India Cements (ICMN.BO)
Neutral Equity Research
Above expectations: strong pricing in weak market led the beat
What surprised us
India Cements reported 1QFY12 net income of Rs1.0bn (+308% yoy, +85%
qoq), 117% / 120% ahead of GS and Bloomberg consensus estimates
respectively. The significant beat was mainly on the back of stronger than
expected realisations (up 35% yoy, vs GSe of +18% yoy), which is all the
more surprising given that it is for a period when cement demand in South
India (key market for the company) saw a decline in growth of 7.7%. Sales
volume at 2.31mn ton was largely in line. At the operating level, 1QFY12
EBITDA came in at Rs2,461mn, (+141% yoy, +177% qoq) 45% ahead of our
and 43% ahead of consensus estimates. EBITDA/ton came in at Rs1,065 (vs
GSe Rs720). The company reported a deferred tax credit which led to
lower effective tax rate of 16.4% in 1Q, driving a better than expected
bottomline. The capex projects in India are on track – and the company
expects to commence mining operations at the Indonesian coal
concession by Jan 2012. The company’s subsidiary Trinetra Cement,
which houses the Rajasthan plant is ramping up and reported sales of
220kT, EBITDA/ton of Rs620 and loss of Rs20 mn.
What to do with the stock
We revise our FY12/13/14 EPS estimates by 26%/13%/7% as a result of
strong operating performance and better pricing performance in key
markets. However, we lower our 12-m EV/RC based TP to Rs95 (from
Rs103) on lower EV/RC of 65% (from 70% earlier) due to near-term
headwinds to demand, and retain our Neutral rating. Key risks: Upside:
Sustained strength in pricing; Downside: Higher coal costs and lower-thanexpected increase in volumes
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
India Cements (ICMN.BO)
Neutral Equity Research
Above expectations: strong pricing in weak market led the beat
What surprised us
India Cements reported 1QFY12 net income of Rs1.0bn (+308% yoy, +85%
qoq), 117% / 120% ahead of GS and Bloomberg consensus estimates
respectively. The significant beat was mainly on the back of stronger than
expected realisations (up 35% yoy, vs GSe of +18% yoy), which is all the
more surprising given that it is for a period when cement demand in South
India (key market for the company) saw a decline in growth of 7.7%. Sales
volume at 2.31mn ton was largely in line. At the operating level, 1QFY12
EBITDA came in at Rs2,461mn, (+141% yoy, +177% qoq) 45% ahead of our
and 43% ahead of consensus estimates. EBITDA/ton came in at Rs1,065 (vs
GSe Rs720). The company reported a deferred tax credit which led to
lower effective tax rate of 16.4% in 1Q, driving a better than expected
bottomline. The capex projects in India are on track – and the company
expects to commence mining operations at the Indonesian coal
concession by Jan 2012. The company’s subsidiary Trinetra Cement,
which houses the Rajasthan plant is ramping up and reported sales of
220kT, EBITDA/ton of Rs620 and loss of Rs20 mn.
What to do with the stock
We revise our FY12/13/14 EPS estimates by 26%/13%/7% as a result of
strong operating performance and better pricing performance in key
markets. However, we lower our 12-m EV/RC based TP to Rs95 (from
Rs103) on lower EV/RC of 65% (from 70% earlier) due to near-term
headwinds to demand, and retain our Neutral rating. Key risks: Upside:
Sustained strength in pricing; Downside: Higher coal costs and lower-thanexpected increase in volumes
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