CARE maintains fundamental grade of 4/5 on OCL India

Revenue nosedives by 22%; led by 39% decrease in cement volume

OCL reported 22% y-o-y and 21% q-o-q decline in net revenues to Rs.341.2 crore during Q4FY12 (refers to the period January 2012 to March 2012) on account of lower cement volume which declined by 39% to 0.60 mn tons. However, the decline in cement volumes was mitigated to an extent by 20% increase in realization to Rs.4,196/ ton. Revenue from the refractory division declined by 11% y-o-y to Rs.84 crore.

Lowest operating performance in last eight quarters
As per the order of the Deputy Director of Mines, Odisha, OCL could not mine limestone from its Lanjiberna Mines, which impacted Q4FY12 performance. Weak top-line performance and purchase of clinker from outside led to 92% decline in EBITDA to Rs.6.4 crore and EBITDA margin to 1.9%. OCL reported a net loss of Rs.26.5 crore in Q4FY12 against PAT of Rs.33.9 crore in Q4FY11.

Update on Lanjiberna Mines
The company has received provisional approval to mine limestone from its mines (entire capacity) for one year with effect from April 1, 2012. With this and strong realizations achieved in the first two months of FY13, the management expects healthy performance during FY13E. Also, OCL expects to receive final mining approval in next few months.

Valuation
CARE Equity Research assigns valuation grade of 5/5 to OCL based on the Current Intrinsic Value (CIV) of Rs.124 as against Current Market Price (CMP) of Rs.94, indicating that shares of OCL have 'Considerable Upside Potential'.

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