Angel Broking neutral on Madras Cements

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Angel Broking neutral on Madras Cements

Angel Broking has maintained neutral rating on Madras Cements, in its February 6, 2012 research report.

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Angel Broking has maintained neutral rating on Madras Cements , in its February 6, 2012 research report.

"For 3QFY2012, Madras Cements (MC) posted a strong performance, with net profit surging by 76.7% yoy to `77cr. Strong bottom-line performance was on account of both 19.1% yoy growth in dispatches (though on a lower base) and 8.6% yoy growth in realization. We remain Neutral on the stock."

"MC registered 27.9% yoy top-line growth to `741cr, driven by 29.4% yoy growth in the cement division's revenue. However, revenue of the windmill division fell by 38.8% yoy to `7.7cr. Production discipline in southern India during 3QFY2012 led to the improvement in cement realization by 8.6% yoy to `4,245/tonne. Dispatches grew by 19.1% yoy to 1.73mn tonnes (though on a low base, as dispatches had declined by 19.7% yoy to 1.45mn tonnes in 3QFY2011). However, OPM improved marginally by 243bp yoy to 28.0%, as the increase in per tonne freight costs and other expenses (up 15.6% and 20.1% yoy, respectively) eroded most part of realization growth. During the quarter, depreciation increased by 13.1% yoy as the company had higher captive power capacity during the quarter."

"Going ahead, we expect MC to post a 13.0% and 34.0% CAGR in its top line and bottom line, respectively, over FY2011-13E. At the CMP, the stock is trading at moderate valuations of EV/tonne of US$77 on current capacity of 12.5mtpa (US$53 on FY2013E capacity). However, considering its unfavorable locational presence and risk of margin pressure (if ongoing production discipline in southern India breaks down), we continue to maintain our Neutral view on the stock," says Angel Broking research report.   

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To read the full report click on the attachment