MOSL: INDIA CEMENTS (Neutral)-Beat led by better-than-estimated realizations
​India Cements: Beat led by better-than-estimated realizations
(ICEM IN, Mkt Cap USD0.9b, CMP INR188, TP INR210, 12% Upside, Neutral)
- Volumes up 2% YoY: India Cements (ICEM) posted 2% YoY growth in cement volumes to 2.91mt (incl. Trinetra volumes) in 4QFY17, as the growth rate moderated in the southern markets. Gross cement realizations increased 2% QoQ, better than our estimate of a 2% decline. Revenues of INR13.4b increased 7% QoQ. YoY financials are not comparable as 4QFY16 does not include the Trinetra merger.
- Margin impacted: EBITDA declined 2% YoY/QoQ to INR1.9b. Margins at 14.1% contracted ~2pp QoQ due to higher power & fuel and freight costs. Hence, cement EBITDA/ton stood at INR655 (-INR95/t QoQ) due to cost push. However, margins are likely to see a strong uptick in 1QFY18, led by strong pricing improvement in April 2017. Interest cost declined 11% QoQ to INR820m, and the tax rate too reduced QoQ to 25% in 4QFY17. Hence, PAT of INR343m increased 12% QoQ.
- Debt-reduction program on track: India Cement has reduced gross debt by INR2.3b YoY to INR29b in FY17 in standalone entity, led by improved operating cash flow and limited capex requirement.
India Cements is engaged in the manufacturing and selling of cement. Co. also is engaged in providing power generation from wind farms. Co. owns two brands of cement in India namely: Sankar cement and Coromandel cement. Through its subsidiaries, Co. is engaged in the investment of equity shares; the transportation of coal and other raw materials; and the provision of logistics support in the form of contract and market truck management and scheduling. Co.'s manufactured products include cement, calcium carbide and textiles. As of Mar 31 2003, production and sale of cement were 4,946,000 tonnes and 4,999,000 tonnes, respectively.
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