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India Cements, 20th February, 2013
India Cements, 20th February, 2013
India Cements
Performance Highlights
Quarterly results (standalone)
Y/E Mar (` cr) Net revenue Operating profit OPM (%) Reported Net profit
Source: Company, Angel Research
NEUTRAL
CMP Target Price
Investment Period
2QFY13 1,123 205 18.3 49 % chg qoq (3.6) (6.0) (46)bp (47) 3QFY12 944 197 20.9 56 % chg yoy 14.7 (2.2) (306)bp (53.6)
`84 -
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Cement 2,586 2,714 1.1 119/71 207,110 10 19,636 5,940 ICMN.BO ICEM@IN
India Cements (ICEM) posted a 53.6% yoy decline in bottom-line to `26cr on account of steep increase in freight costs. However, the performance on the volume front was encouraging with the company posting a 10% yoy growth in sales volume during the quarter aided by healthy demand scenario in Tamil Nadu, Karnataka and Kerala. OPM down 306bp yoy: ICEM posted a 14.7% yoy growth in top-line to `1,082cr, which was higher than our estimates. The top-line growth was aided by a 10% increase in sales volume during the quarter. The companys OPM fell by 306bp yoy to 17.8% on account of steep increase in freight costs. The companys freight cost/tonne rose by 25.6% yoy to `982. Net Plant Realization stood at `3,359/tonne (vs `3,461/tonne in 3QFY2012). Finance costs went up by 9.7% yoy to `82cr. However, there was a reduction in the power and fuel cost/tonne on a sequential basis (higher marginally by 1.3% on a yoy basis) due to decline in imported coal prices and stabilization of Sankar Nagar CPP. Thus, the bottomline fell by 53.6% yoy to `26cr. Outlook and valuation: We expect ICEMs 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.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 28.2 18.4 32.6 20.8
3m 7.1
1yr 7.4
3yr 21.3
3,417 (7.3) 40 (88.7) 1.3 10.2 64.6 0.7 1.2 1.6 1.3
68
4,066 19.0 297 641.1 9.7 18.8 8.7 0.7 8.6 7.2 1.2
67
4,439 9.2 209 (29.7) 6.8 16.6 12.4 0.7 5.9 6.0 1.2
64
4,789 7.9 279 33.7 9.1 17.2 9.3 0.7 7.7 6.8 1.1
62
V Srinivasan
022-39357800 v.srinivasan@angelbroking.com
12.5
6.6
7.0
6.2
(%) 40
1,201
1,123
1,082 30 20 10 0
Operating performance
During the quarter, ICEM sold 2.42mn tonne of cement, registering a 10% yoy growth. There was healthy demand in Tamil Nadu and Karnataka which led to the relatively strong 10% volume growth. However, net plant realization was down by 2.9% yoy and stood at `3,359/tonne, due to the sharp correction in cement prices in Andhra Pradesh during the quarter and the steep increase in freight costs. The raw-material cost per tonne remained flat on yoy basis. Power and fuel cost per tonne stood at `1,323, up 1.3% yoy. Power and fuel costs increased on account of increase in power tariffs in both Tamil Nadu and Andhra Pradesh. Freight cost per tonne rose by 26.1% yoy to `983 due to increased costs of diesel, and higher railway freight charges. The operating profit per tonne of cement stood at `792 up 8.6% on yoy basis.
ICEMs subsidiary, Trinetra Cement (Trinetra) posted a flat performance on the volume front and dispatched 0.27mn tonne of cement in 3QFY2013. Trinetras EBITDA for the quarter stood at `17cr vs `7cr in 3QFY2012. Its NPR stood at `2,942/tonne vs `2,704/tonne in 3QFY2012.
Recommendation rationale
Worst plant location compared to all companies in our coverage universe: About 93% of ICEMs consolidated total capacity is located in Tamil Nadu (TN), Andhra Pradesh (AP) and Rajasthan. As per our estimates, for FY2013, the capacity situation in TN is expected to be slightly better than the other two, as a large part of its excess of 18.1mt can be supplied to Kerala (where the total deficit is expected to be 8.6mt). However, AP is expected to have India's highest indigenous demand supply gap (42mt) and there is no nearby supply-deficit state where the excess output could be sold more economically than other states.
FY2013E Revised
4,439 3,700 739 282 320 277 89 209
Earlier
4,666 3,824 843 278 292 472 142 330
Revised
4,789 3,966 823 296 301 398 119 279
Var (%)
2.6 3.7 (2.3) 6.5 3.2 (15.6) (15.6) (15.6)
143 -
9.0 -
Source: Company, Angel Research; Note: *Y/E December; ^ Computed on TTM basis
Company Background
India Cements is the largest cement company in south India, with a capacity 14mtpa spread across four plants each in TN and AP and a plant at Parli Maharashtra (1.1mtpa). It has also commissioned a plant of 1.5mtpa capacity Banswara in Rajasthan through its subsidiary, Trinetra Cement, thereby taking consolidated capacity to 15.6mtpa. The company has bought franchise rights IPL team - Chennai Super Kings, for ten years in 2008 for US$91mn. of in at its of
FY2013E
4,439 9.2 3,700 569 1,186 339 1,606 739 (3.6) 16.6 282 457 (11.3) 10.3 320 160 57.8 297 (22.7) 20 277 89 32.0 189 209 (29.7) 4.7 6.8 6.8 (29.7)
FY2014E
4,789 7.9 3,966 622 1,225 356 1,763 823 11.4 17.2 296 527 15.3 11.0 301 173 43.4 398 34.0 398 119 30.0 279 279 33.7 5.8 9.1 9.1 33.7
Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with previous year numbers
FY2009
FY2010
FY2011
FY2012
FY2013E
FY2014E
FY2013E
277 282 (192) 160 89 118 (350) 160 (190) 225 94 131 59 3 62
FY2014E
398 296 15 173 119 417 (350) 173 (177) (100) 139 (239) 1 62 62
Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis (%) EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Int.)
0.5 2.0 6.5 0.5 2.8 3.6 0.4 5.1 0.7 0.6 3.0 1.8 0.6 3.3 1.4 0.5 2.8 1.7 0.7 38 36 160 89 0.7 40 30 136 121 0.6 50 27 124 85 0.7 46 21 103 19 0.7 46 25 83 39 0.7 47 31 83 43 12.9 15.7 18.4 8.2 9.6 9.7 1.6 1.7 1.2 7.2 7.4 8.6 6.0 6.2 5.9 6.8 7.0 7.7 21.6 66.6 0.6 9.0 3.9 0.5 11.8 13.8 66.7 0.6 5.5 4.6 0.5 6.0 3.1 75.8 0.5 1.2 5.4 0.5 (0.8) 12.7 76.9 0.6 5.5 10.7 0.5 2.9 10.3 68.0 0.6 4.1 9.1 0.6 1.2 11.0 70.0 0.6 4.8 8.6 0.6 2.6 18.1 18.1 22.5 2.3 105.0 10.1 10.1 19.1 2.3 113.0 1.3 1.3 10.2 1.7 113.4 9.7 9.7 17.7 4.8 112.6 6.8 6.8 15.3 3.1 115.7 9.1 9.1 18.7 4.5 120.3
FY2013E
FY2014E
E-mail: research@angelbroking.com
Website: www.angelbroking.com
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
India Cements No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):