India Cements Q1 PAT seen down 13% YoY to Rs 89 cr

The Chennai-based India Cements is going to declare its numbers for the quarter ended June 2012 on Monday. Analysts on an average expect the profit after tax to go down by 13% year-on-year to Rs 89.2 crore, but quarter-on-quarter that is likely to jump 37%.

PAT will be supported by Indian Premier League (as it owns Chennai Super Kings team) revenue of Rs 90 crore as against Rs 84.8 crore in a year ago period.

Investors should watch out for forex loss/gain. In the first quarter of previous financial year 2011-12, India Cements had reported a forex gain of Rs 3.64 crore.

Net sales are seen going up by 10% YoY and 4% QoQ to Rs 1,166.2 crore and earnings before interest, tax, depreciation and amortisation (EBITDA) are expected to go up by 2% YoY and 15% QoQ to Rs 246.7 crore during the same period.

EBITDA margin is likely to decline 170 basis points to 21.2% YoY, but that is seen rising 190 basis points QoQ.

Realizations:

Stable pricing environment (due to producers’ discipline) would result in realization improving by 2% QoQ and 4% YoY.

Price hike in South India in March 2012 will drive sequential increase in realizations.

Sales volume is likely to increase 5% YoY to 2.45 mt, but that is seen falling 6% QoQ.

Capacity utilization is expected to remain at 65% as against 67% in the previous quarter.

EBITDA margins improvement:

Analysts expect fuel costs to remain stable sequentially as fall in global coal prices will offset by the rupee depreciation.

India Cements would be one of the biggest beneficiaries with respect to softening in imported coal prices as it imports more than 70% of their total requirement.

For every 10% change in imported coal prices, earnings per share changes by around 15%.

Protected against Higher railway freight:

India Cements has low exposure (about 19-24% of volumes) to railways and so it will be protected. In March 2012, railway freight for various commodities was effectively hiked by around 15-20%.

Analysts feel the high debt continues to be a overhang. Total debt stands more than Rs 2,000 crore.