Hold India Cement; target of Rs 95: ICICI Direct

ICICI Direct's research report on India Cement

On a broad view, India Cements reported a positive set of Q1FY20 numbers with sales and profitability beating our estimates. Revenues for the quarter increased ~8% YoY to Rs 1468.8 crore (above I-direct estimate of Rs 1325 crore) on the back of strong growth in realisations while volumes declined marginally. Volumes for the quarter were at 3.04 MT (above I-direct estimate of 2.8 MT). Blended realisations showcased a strong increase by 9.2% YoY to Rs 4832/t. EBITDA margins expanded 500 bps YoY to 16.5% YoY while EBITDA/t increased 57% YoY to Rs 796/t on the back of a strong improvement in realisations owing to price hikes taken in the previous and this quarter. EBITDA increased 55% YoY to Rs 242 crore (vs. I-direct estimate of Rs 180 crore) and PAT increased 240% YoY to Rs 72.2 crore (vs. I-direct estimate of Rs 32.8 crore) on the back of strong profitability during the quarter.

Outlook

Hence, we value India Cements at ~7x FY21E EV/EBITDA, thus reducing our target price from Rs 115 earlier to Rs 95 per share.