Buy India Cements; target of Rs 225: Reliance Securities

Reliance Securities' research report onIndia Cements

India Cements (ICL) has reported a dismal operating performance in 1QFY18 despite firm realisation mainly owing to steep rise in operating cost. EBITDA came in at Rs1.86bn (-8% YoY and -2% QoQ) below our expectation of Rs2.1bn. EBITDA/tonne stood at Rs696 vs. Rs835 and Rs660 in 1QFY17 and 4QFY17, respectively. Cement operating cost/tonne surged to Rs4,110 (+14% YoY and +4% QoQ) impacted by spike in power and fuel cost/tonne (+25% YoY) and freight cost/tonne (+9% YoY). Further, a non-recurring expense of Rs69mn pertaining to ESOPs provision and wage revision led to 15% QoQ rise in employee cost.

Outlook

Hence, we reiterate our BUY recommendation on the stock with an unrevised Target Price of Rs225 (7.0x FY19E EBITDA).

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