India Cements (ICEM) posted a 61.3% yoy decline in bottom-line to `26cr on
account of flat realization on a yoy basis and steep increase in freight costs.
Although net realization was flat yoy, the company’s net plant realization was
down by 6.2% yoy at `3,250/tonne. The company’s net realization declined
2.8% on a sequential basis due to the steep price correction in Andhra Pradesh
during the quarter. Operating profit is down by 15.6% on a yoy basis. Volume
growth was moderate at 6.7% yoy.
OPM down 412bp yoy: ICEM posted a 8.1% yoy growth in top-line to `1,199cr,
which was in-line with our estimates. The top-line growth was aided by a 6.7%
increase in sales volume during the quarter. The company’s OPM fell by 310bp
yoy to 14.7% on account of steep increase in freight costs. The company’s freight
cost/tonne rose by 21.5% yoy to `990. Despite the fall in imported coal prices,
P&F costs remained flat on a yoy basis due to higher prices charged by Singareni
collieries and purchase of high cost power for Andhra Pradesh plants.
Outlook and valuation: We expect ICEM’s return ratios to remain subdued due to
substantial investments in subsidiaries. At the current market price, though the stock
is trading at a low valuation of EV/tonne of US$64 on FY2015E capacity, we
believe the same is justified considering the company's unfavorable locational
presence. Hence, we maintain our Neutral recommendation on the stock.
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account of flat realization on a yoy basis and steep increase in freight costs.
Although net realization was flat yoy, the company’s net plant realization was
down by 6.2% yoy at `3,250/tonne. The company’s net realization declined
2.8% on a sequential basis due to the steep price correction in Andhra Pradesh
during the quarter. Operating profit is down by 15.6% on a yoy basis. Volume
growth was moderate at 6.7% yoy.
OPM down 412bp yoy: ICEM posted a 8.1% yoy growth in top-line to `1,199cr,
which was in-line with our estimates. The top-line growth was aided by a 6.7%
increase in sales volume during the quarter. The company’s OPM fell by 310bp
yoy to 14.7% on account of steep increase in freight costs. The company’s freight
cost/tonne rose by 21.5% yoy to `990. Despite the fall in imported coal prices,
P&F costs remained flat on a yoy basis due to higher prices charged by Singareni
collieries and purchase of high cost power for Andhra Pradesh plants.
Outlook and valuation: We expect ICEM’s return ratios to remain subdued due to
substantial investments in subsidiaries. At the current market price, though the stock
is trading at a low valuation of EV/tonne of US$64 on FY2015E capacity, we
believe the same is justified considering the company's unfavorable locational
presence. Hence, we maintain our Neutral recommendation on the stock.
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