Angle Broking neutral on Madras Cements

Angel Broking has recommended neutral rating on Madras Cements, in its August 9, 2012 research report. The research firm expects Madras Cements to post a 10.2% and 5.8% CAGR in its top-line and bottom-line respectively over FY2012-14.

“Madras Cements is one of the largest cement players in southern India, with a capacity of 14.5mtpa (incl 1.95mtpa of split grinding capacities). The capacities are spread across TN (9.55mtpa), AP (3.7mtpa); and Karnataka (0.3mtpa). Apart from these, the company has a grinding plant at Kolaghat in West Bengal (1mtpa) and also a wind power generation capacity of 159MW.”

“For 1QFY2013, Madras Cements (MC) posted a healthy 25.1% yoy growth in its net profit to Rs123cr, which was above our estimates. The company posted a highly impressive 21.3% yoy growth on the volume front indicating pick-up in cement demand in its key markets Tamil Nadu and Kerala. Realizations too were higher by 7.3% yoy (up 2.4% qoq). We remain Neutral on the stock. For 1QFY2013 Madras Cements has posted a robust 29.5% yoy growth in its net sales to `989cr, led by higher volumes. The revenue of the cement division rose by 29.5% yoy to Rs 948cr, while the windmill division’s revenue stood at Rs 41cr up 27.6% on a y-o-y basis. The OPM for the quarter stood at 31%, down 98bp on a y-o-y basis. It fell despite the higher realization on account of increase in raw material, freight and power costs. The EBITDA/tonne rose by 4.6% yoy and 32.2% qoq to Rs 1,286. During the quarter, the company commissioned its 2mtpa cement plant II at Ariyalur, resulting in interest and depreciation costs going up by 14% yoy and 21.8% yoy respectively.”

“Going ahead, we expect Madras Cements to post a 10.2% and 5.8% CAGR in its top-line and bottom-line respectively over FY2012-14. At the current market price, the stock is trading at a moderate valuation of US$65 EV/tonne on the current capacity (US$60 on FY2014E capacity). However, considering its unfavorable locational presence and risk of margin pressure, we continue to maintain our Neutral recommendation on the stock,” says Angel Broking research report.

FIIs holding more than 30% in Indian cos

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