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EARNINGS REVIEW
India Cements (ICMN.BO)
Neutral Equity Research
Above expectations: In line EBITDA, deferred tax credit drives beat
What surprised us
India Cements reported 3QFY12 net income of Rs563 mn (-162% yoy, -19%
qoq), 51% above GS and 39% above consensus estimates including (1) a
Rs128mn gain as the company stopped charging MTM translation loss on
FX borrowings; (2) a deferred tax credit of Rs43mn resulting from the
redemption of the $75mn FCCBs on its books. Operating results were in
line: Sales volume at 2,185 kt was largely in line while realizations were
strong at Rs4,309/ton (+17% yoy, -4% qoq), driven mainly by a pick-up in
cement demand in South India (key market for the company) which grew
3% yoy. The company reported utilization of 66% during 9MFY12 vs.
industry average of 60% in South India (and 72% for all India). 3QFY12
EBITDA came in at Rs1,970 mn, (+53% yoy, -23% qoq) 4% below our
estimates. EBITDA/ton came in at Rs902 (vs GSe Rs1,000) as margins were
impacted by higher energy and power costs. The bottom line beat was
mainly driven by lower interest expense (including the FX MTM
adjustment) and lower-than-expected taxes (effective tax rate of 9.2% vs
GSe of 30%). The company expects the demand environment to pick-up on
an improving macro. The captive power plant in Tamil Nadu has been
commissioned and trial runs are being undertaken. The company expects
to commence mining operations in Indonesia in this quarter.
What to do with the stock
We revise our FY12-14 EPS estimates by 23% to 5% to factor in revised
volumes cost and tax rate assumptions. We retain our Neutral rating and
raise our 12-m EV/RC based TP to Rs91 from Rs84 on higher earnings
momentum. Key risks: Upside: Sustained strength in pricing; Downside:
Higher coal costs and lower-than-expected 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: In line EBITDA, deferred tax credit drives beat
What surprised us
India Cements reported 3QFY12 net income of Rs563 mn (-162% yoy, -19%
qoq), 51% above GS and 39% above consensus estimates including (1) a
Rs128mn gain as the company stopped charging MTM translation loss on
FX borrowings; (2) a deferred tax credit of Rs43mn resulting from the
redemption of the $75mn FCCBs on its books. Operating results were in
line: Sales volume at 2,185 kt was largely in line while realizations were
strong at Rs4,309/ton (+17% yoy, -4% qoq), driven mainly by a pick-up in
cement demand in South India (key market for the company) which grew
3% yoy. The company reported utilization of 66% during 9MFY12 vs.
industry average of 60% in South India (and 72% for all India). 3QFY12
EBITDA came in at Rs1,970 mn, (+53% yoy, -23% qoq) 4% below our
estimates. EBITDA/ton came in at Rs902 (vs GSe Rs1,000) as margins were
impacted by higher energy and power costs. The bottom line beat was
mainly driven by lower interest expense (including the FX MTM
adjustment) and lower-than-expected taxes (effective tax rate of 9.2% vs
GSe of 30%). The company expects the demand environment to pick-up on
an improving macro. The captive power plant in Tamil Nadu has been
commissioned and trial runs are being undertaken. The company expects
to commence mining operations in Indonesia in this quarter.
What to do with the stock
We revise our FY12-14 EPS estimates by 23% to 5% to factor in revised
volumes cost and tax rate assumptions. We retain our Neutral rating and
raise our 12-m EV/RC based TP to Rs91 from Rs84 on higher earnings
momentum. Key risks: Upside: Sustained strength in pricing; Downside:
Higher coal costs and lower-than-expected volumes.
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