Angel Broking neutral on India Cements

Angel Broking has maintained neutral rating on India Cements in its February 19, 2013 research report.

“India Cements (ICEM) posted a 53.6percent yoy decline in bottom-line to Rs26cr on account of steep increase in freight costs. However, the performance on the volume front was encouraging with the company posting a 10percent yoy growth in sales volume during the quarter aided by healthy demand scenario in Tamil Nadu, Karnataka and Kerala.”

“ICEM posted a 14.7percent yoy growth in top-line to Rs1,082cr, which was higher than our estimates. The top-line growth was aided by a 10percent increase in sales volume during the quarter. The company’s OPM fell by 306bp yoy to 17.8percent on account of steep increase in freight costs. The company’s freight cost/tonne rose by 25.6percent yoy to Rs982. Net Plant Realization stood at Rs3,359/tonne (vs Rs3,461/tonne in 3QFY2012). Finance costs went up by 9.7percent yoy to Rs82cr. However, there was a reduction in the power and fuel cost/tonne on a sequential basis (higher marginally by 1.3percent on a yoy basis) due to decline in imported coal prices and stabilization of Sankar Nagar CPP. Thus, the bottomline fell by 53.6percent yoy to Rs26cr.”

“We expect ICEM’s return ratios to remain subdued due to substantial investments in subsidiaries. At the current market price, though the stock is trading at a low valuation of EV/tonne of US$62 on FY2014E capacity, we believe the same is justified considering the company's unfavorable locational presence. Hence, we maintain our neutral recommendation on the stock,” says Angel Broking research report.

Public holding more than 90% in Indian cos

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