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RCL came out with better than expected set of numbers for Q4CY11 on the back of superlative performance by Carbon
Products segment. While the topline was in line with our estimates at INR 1608 mn (up 38% YoY & 24% QoQ) led by 18% YoY
increase in CPC volumes, net profit exceeded our estimates to INR 1802 mn in Q4CY11 (despite a forex loss of INR 294 mn due
to USD denominated forex loan). Its plans of setting up 35 MW waste heat recovery plant by CY12 remains on track. The
company has completed 85% of the buyback program at an average price of INR 31/share till date. We introduce CY13 estimates
and maintain a BUY rating on the stock with a target price of INR 71/share.
CPC segment on the boil
RCL reported a revenue growth of 38% YoY & 25% QoQ to INR
16079 mn on the back of 41% YoY increase in Carbon Products
revenues to INR 13995 mn. This superlative performance was aided
by 18% growth in CPC volumes to 533000 tonnes & 24% growth in
CPC realisations to $ 512/tn. In CY11, revenue of Carbon Product
segment grew by 56% to INR 48292 mn aided by 4% increase in
CPC volumes & 43% surge in realisations to $ 468/tn. Demand for
CPC is healthy and RCL continues to identify new long-term sources
for its GPC supplies worldwide due to its limited availability.
CPC EBIDTA/tn to remain between USD$90-100
EBIDTA of CPC segment improved significantly aided by 17% YoY &
11% QoQ increase in CPC EBIDTA margin to $123/tn. Currently
CPC prices are hovering ~ $ 500/tn and management expects to
negotiate the CPC pricing for H1CY12 in next few days. Although
we are expecting some softness in CPC pricing, we expect CPC
EBITDA margin to remain in the range of $90-100/tn going forward.
Cost pressure continue to dent Cement segment
Cement turnover improved by 20% YoY to INR 2081 mn aided by
volume growth of 11% YoY to 523000 tonne & 8% increase in
realisations to INR 3978/tn. Cost pressure continues to dent this
segment as EBIDTA margin declined by 3% YoY & 22% QoQ to INR
682/tn. Volume is likely to remain muted due to political agitations
in the state of Andhra Pradesh.
Expansion plans on track
RCL's plans of setting up 35 MW waste heat recovery plant at a
cost of $ 65 mn remains on track and is scheduled to commence
operations by CY12. The company has incurred a capex of $ 25
mn in CY11 and is set to incur the balance in current year. The
project is eligible for Government support in the form of tax breaks,
capital grants and highest tariff.
Deleveraging the balance sheet
Gross debt as on Dec 2011 stood at $ 709 mn (reduced by $ 40 mn
QoQ on robust profitability), consisting of term loan of $ 625 mn
and working capital loan of $ 84 mn. As a process of deleveraging
the balance sheet, RCL has repaid the high-cost subordinated
bonds of $16 million carrying interest rate of 11.125% in Nov
2011 by exercising the first call option available to the company.
With existing cash balance of $ 167 mn, RCL is comfortably placed
to meet its repayment obligation of $ 148 mn & capex obligation
of ~$ 55 mn till Dec 2013.
Outlook & Valuation
Increasing demand for aluminium, dominant presence in CPC
market, supply agreement for GPC and limited GPC availability
presents attractive investment opportunity. Buyback of ~8.5 mn
equity shares at an average price of INR 31/share till date &
dividend of INR 1.1/share declared for CY11, augurs well for
shareholders. We have introduced CY13E estimates and maintain
our BUY rating on the stock with a target price of INR 71/share. At
the CMP of INR 37, the stock trades at CY13E P/BV of 0.4x & PE of
2.0x and EV/EBIDTA of 2.7x its CY13E earnings.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RCL came out with better than expected set of numbers for Q4CY11 on the back of superlative performance by Carbon
Products segment. While the topline was in line with our estimates at INR 1608 mn (up 38% YoY & 24% QoQ) led by 18% YoY
increase in CPC volumes, net profit exceeded our estimates to INR 1802 mn in Q4CY11 (despite a forex loss of INR 294 mn due
to USD denominated forex loan). Its plans of setting up 35 MW waste heat recovery plant by CY12 remains on track. The
company has completed 85% of the buyback program at an average price of INR 31/share till date. We introduce CY13 estimates
and maintain a BUY rating on the stock with a target price of INR 71/share.
CPC segment on the boil
RCL reported a revenue growth of 38% YoY & 25% QoQ to INR
16079 mn on the back of 41% YoY increase in Carbon Products
revenues to INR 13995 mn. This superlative performance was aided
by 18% growth in CPC volumes to 533000 tonnes & 24% growth in
CPC realisations to $ 512/tn. In CY11, revenue of Carbon Product
segment grew by 56% to INR 48292 mn aided by 4% increase in
CPC volumes & 43% surge in realisations to $ 468/tn. Demand for
CPC is healthy and RCL continues to identify new long-term sources
for its GPC supplies worldwide due to its limited availability.
CPC EBIDTA/tn to remain between USD$90-100
EBIDTA of CPC segment improved significantly aided by 17% YoY &
11% QoQ increase in CPC EBIDTA margin to $123/tn. Currently
CPC prices are hovering ~ $ 500/tn and management expects to
negotiate the CPC pricing for H1CY12 in next few days. Although
we are expecting some softness in CPC pricing, we expect CPC
EBITDA margin to remain in the range of $90-100/tn going forward.
Cost pressure continue to dent Cement segment
Cement turnover improved by 20% YoY to INR 2081 mn aided by
volume growth of 11% YoY to 523000 tonne & 8% increase in
realisations to INR 3978/tn. Cost pressure continues to dent this
segment as EBIDTA margin declined by 3% YoY & 22% QoQ to INR
682/tn. Volume is likely to remain muted due to political agitations
in the state of Andhra Pradesh.
Expansion plans on track
RCL's plans of setting up 35 MW waste heat recovery plant at a
cost of $ 65 mn remains on track and is scheduled to commence
operations by CY12. The company has incurred a capex of $ 25
mn in CY11 and is set to incur the balance in current year. The
project is eligible for Government support in the form of tax breaks,
capital grants and highest tariff.
Deleveraging the balance sheet
Gross debt as on Dec 2011 stood at $ 709 mn (reduced by $ 40 mn
QoQ on robust profitability), consisting of term loan of $ 625 mn
and working capital loan of $ 84 mn. As a process of deleveraging
the balance sheet, RCL has repaid the high-cost subordinated
bonds of $16 million carrying interest rate of 11.125% in Nov
2011 by exercising the first call option available to the company.
With existing cash balance of $ 167 mn, RCL is comfortably placed
to meet its repayment obligation of $ 148 mn & capex obligation
of ~$ 55 mn till Dec 2013.
Outlook & Valuation
Increasing demand for aluminium, dominant presence in CPC
market, supply agreement for GPC and limited GPC availability
presents attractive investment opportunity. Buyback of ~8.5 mn
equity shares at an average price of INR 31/share till date &
dividend of INR 1.1/share declared for CY11, augurs well for
shareholders. We have introduced CY13E estimates and maintain
our BUY rating on the stock with a target price of INR 71/share. At
the CMP of INR 37, the stock trades at CY13E P/BV of 0.4x & PE of
2.0x and EV/EBIDTA of 2.7x its CY13E earnings.
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