Sell India Cements; target of Rs 310: Motilal Oswal

Motilal Oswal's research report on India Cements

India Cements (ICEM) reported an operating loss of INR1.9b (vs. estimated loss of INR854m) in 3QFY25. Sales volume increased ~5% YoY to 2.1mt (~2% below our estimate), while blended realization declined ~20% YoY to INR4,333 (~5% below our estimate). ICEM’s adj. net loss stood at INR2.6b (estimated loss of INR1.4b) vs. a net loss of INR345m in 3QFY24. The company’s capacity utilization stood at 57% in 3QFY25 vs. 50%/59% in 3QFY24/2QFY25. However, a sharp decline in realization led to a higher operating loss. UTCEM has acquired a 32.7% stake in ICEM, taking its aggregate shareholding in the company to 55.5%. ICEM has now become a
subsidiary of UTCEM. The company is estimated to benefit from synergy with UTCEM, led by the introduction of new system and processes, economies of scale, cost optimization initiatives and a wider distribution network. ICEM aims to strengthen its presence in its core markets (South).

Outlook

We value ICEM at a replacement cost (EV/t of USD100) and arrive at our TP of INR310. Reiterate Sell.