India Cements Higher cement realizations help beat estimates : :Emkay

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India Cements

Higher cement realizations help beat estimates

HOLD

CMP: Rs 75                                       Target Price: Rs 86

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n     Q2FY12 APAT at Rs.76bn significantly above est led by higher cement prices. Southern markets held on to elevated price levels- realizations at Rs4223/t (vs est of Rs3922/t)

n     Higher prices drive EBITDA/t to Rs887, EBITDA up ~8X yoy to Rs2.5 bn – above est. Cost pressure continue as impact of higher imported coal prices aggravated with sharp appreciation in INR impacting company’s P&F cost    

n     Southern cement prices remained firm, the sustainability of the same remains uncertain as cement demand continue to remain sluggish

n     Though ICEM’s valuation at EV/t of USD77 are attractive, unrelated diversification, leveraged balance sheet, sub-optimal return ratios are re-rating hurdles-Maintain HOLD