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India Cements, 20th February, 2013

India Cements, 20th February, 2013

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Published by Angel Broking
20th February, 2013
20th February, 2013

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Categories:Types, Business/Law
Published by: Angel Broking on Feb 20, 2013
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Please refer to important disclosures at the end of this report
 1 
Quarterly results (standalone)
Y/E Mar (
`
cr) 3QFY132QFY13
% chg qoq
3QFY12
% chg yoy
Net revenue
1,0821,123 (3.6)94414.7Operating profit 193205 (6.0)197(2.2)
OPM (%)
17.818.3 (46)bp20.9(306)bp
Reported Net profit
2649 (47)56(53.6)
 
 Source: Company, Angel Research
India Cements (ICEM) posted a 53.6% yoy decline in bottom-line to
 ` 
26cr onaccount of steep increase in freight costs. However, the performance on thevolume front was encouraging with the company posting a 10% yoy growth insales volume during the quarter aided by healthy demand scenario in TamilNadu, 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 company’s OPM fell by 306bpyoy to 17.8% on account of steep increase in freight costs. The company’s freightcost/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/tonneon a sequential basis (higher marginally by 1.3% on a yoy basis) due to declinein imported coal prices and stabilization of Sankar Nagar CPP. Thus, the bottom-line fell by 53.6% yoy to
 ` 
26cr.
Outlook and valuation:
 We expect ICEM’s return ratios to remain subdued due tosubstantial investments in subsidiaries. At the current market price, though the stockis trading at a low valuation of EV/tonne of US$62 on FY2014E capacity, webelieve the same is justified considering the company's unfavorable locationalpresence.
Hence, we maintain our Neutral recommendation on the stock. 
Key Financials (Standalone)
Y/E March (
`
cr) FY2011 FY2012 FY2013E FY2014ENet sales*
3,417 4,066 4,439 4,789
% chg
(7.3) 19.0 9.2 7.9
Net profit
40 297 209 279
% chg
(88.7) 641.1 (29.7) 33.7
FDEPS (
`
)
1.3 9.7 6.8 9.1
OPM (%)
10.2 18.8 16.6 17.2
P/E (x)
64.6 8.7 12.4 9.3
P/BV (x)
0.7 0.7 0.7 0.7
RoE (%)
1.2 8.6 5.9 7.7
RoCE (%)
1.6 7.2 6.0 6.8
EV/Sales (x)
1.3 1.2 1.2 1.1
EV/Tonne (US $)
68 67 64 62
EV/EBITDA (x)
12.5 6.6 7.0 6.2
 Source: Company, Angel research; *does not include IPL revenue
NEUTRAL
CMP
 ` 
84Target Price -
Investment Period -
Stock InfoSector2,714Bloomberg CodeShareholding Pattern (%)Promoters28.2MF / Banks / Indian Fls18.4FII / NRIs / OCBs32.6Indian Public / Others20.8 Abs. (%)3m1yr3yrSensex7.17.421.3ICEM(0.1)(18.8)(29.9)Net Debt (
 ` 
cr)Reuters CodeICMN.BO Avg. Daily Volume207,110Face Value (`)10BetaICEM@INBSE Sensex19,636Nifty5,9401.152 Week High / Low119/71CementMarket Cap (
 ` 
cr)2,586
 V Srinivasan
022-39357800v.srinivasan@angelbroking.com
India Cements
Performance Highlights
3QFY2013 Result Update | Cement
February 19, 2013
 
 
India Cements |
3QFY2013 Result Update
February 19, 2013
 2
Exhibit 1:
 
3QFY2013 performance (Standalone)
Y/E March (
`
cr) 3QFY132QFY13
% chg qoq
3QFY12
% chg yoy
Net Revenue* 1,0821,123
(3.6)
944
14.7
Net Raw-Material Costs 129140
(7.8)
114
13.0(% of Sales) 11.912.910.6
Power & Fuel 297328
(9.5)
267
11.5(% of Sales) 27.530.324.7
Staff Costs 8381
 2.5
71
16.6(% of Sales) 7.67.46.5
Freight & Forwarding 237224
6.2
171
38.7(% of Sales) 21.920.715.8
Other Expenses 143145
(1.3)
124
15.5(% of Sales) 13.213.411.4
Total Expenditure 890918
(3.0)
747
19.1
Operating Profit 193205
(6.0)
197
(2.2)
OPM (%)
17.818.3(46)bp20.9(306)bp
Interest 8267
 23.3
75
9.7
Depreciation 7170
1.3
62
13.8
Other Income 33
5.7
2.2
56.3
Recurring PBT 4372
(40.0)
62
(30.6)
Extraordinary expense ---
!
PBT 4372
(40.0)
62
(30.6)
Provision for Taxation 1723
(25.0)
6
198.1(% of PBT) 39.331.59.2
Reported PAT 2649
(46.8)
56
(53.6)
PATM (%) 2.44.4(2.0)6.0(3.6)
 
 Source: Company, Angel Research; Note: * includes IPL revenue
Exhibit 2:
 
Financial performance
 Source: Company, Angel Research
1,0929441,1181,2011,1231,08270566582492601020304002004006008001,0001,2001,4002QFY123QFY124QFY121QFY132QFY133QFY13
Net revenue (LHS)Rep Net Profit (LHS)OPM (RHS)
(
 ` 
cr)(%)
 
 
India Cements |
3QFY2013 Result Update
February 19, 2013
 3
Exhibit 3:
 
3QFY2013 – Actual vs Angel estimates
(
`
cr) ActualEstimates
Variation (%)
Net revenue 1,082976
10.9
Operating profit 193198
(2.5)
OPM (%) 17.820.3
(245)bp
Reported net profit 2641
(36.4)
 
 Source: Company, Angel Research
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 therelatively 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 pricesin 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 costper tonne stood at
 ` 
1,323, up 1.3% yoy. Power and fuel costs increased onaccount 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 stoodat
 ` 
792 up 8.6% on yoy basis.
Exhibit 4:
 
Per tonne analysis
 
Particulars (
`
/tonne) 3QFY13 2QFY13 3QFY12
yoy chg (%)qoq chg (%)
Net Realization/tonne 4,373 4,4074,2343.3(0.8)Net Plant Realization/tonne 3,359 3,5293,461(2.9)(4.8)Raw-Material Cost/tonne 588 5775811.11.8)Power and Fuel cost/tonne 1,232 1,3231,2161.3(6.9)Freight Cost/tonne 983 90178026.19.1Other Cost/tonne 592 5845645.01.5Operating Profit/tonne 792 7777298.61.8
Source: Company, Angel Research
ICEM’s subsidiary, Trinetra Cement (Trinetra) posted a flat performance on thevolume front and dispatched 0.27mn tonne of cement in 3QFY2013. Trinetra’sEBITDA for the quarter stood at
 ` 
17cr vs
 ` 
7cr in 3QFY2012. Its NPR stood at
 ` 
2,942/tonne vs
 ` 
2,704/tonne in 3QFY2012.

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