Buy India Cements; target of Rs 258: Edelweiss

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Edelweiss' research report on India Cements
On the face of it, India Cement’s (ICEM) Q1FY18 result appears disappointing (INR1.85bn EBITDA lower than INR2bn estimate). But, we highlight the brighter aspects: 1) volume stood flat YoY, despite decline in target markets (South down 7-8% YoY and West ~6%) as ICEM penetrated non-core markets. Expect better volumes in Q2FY18; 2) realisations rose 5% QoQ and stay unchanged currently; and 3) Q1FY18 had ~INR120mn non-recurring cost impact related to ESOPs and meeting emission norms, implying adjusted EBITDA of INR1.97bn.

Outlook

With expected recovery in industry dynamics and management’s focus on debt reduction and increase capacity utilisation, we value ICEM at 9x FY19E EV/EBITDA and maintain ‘BUY/SP’ with a TP of INR258.

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