MOSL: INDIA CEMENTS (Neutral)-Revenue in-line-PAT miss attributed to FX headwinds

India Cements: Revenue in-line; PAT miss attributed to FX headwinds

(ICEM IN, Mkt Cap USD0.4b, CMP INR96, TP INR93, 3% Downside, Neutral)

• In-line sales; south demand robust: ICEM’s 2QFY19 volumes grew 14% YoY to 3.08mt (in-line), led by healthy demand growth in the south market. Blended realizations increased 2% QoQ (-4% YoY) to INR4,508/t (in-line). Net sales, thus, increased 9% YoY to INR13.9b (in-line).
• Earnings hurt by FX fluctuations: Cost/t increased 2% QoQ. Blended EBITDA/t declined 1% QoQ (-25% YoY) to INR503 (our estimate: INR470). EBITDA was down 15% YoY (-1% QoQ) to INR1.5b (our estimate: INR1.45b) due to lower realizations. Margin shrank 3.14pp YoY to 11.2% (-0.3pp QoQ). Interest cost was higher by 8% YoY (+30% QoQ) at INR954m due to INR118m of loss on account of FX fluctuations. PAT declined 94% YoY to INR14.3m (our estimate: INR117m).
• Key takeaways from concall: (1) ICEM entered into a share Purchase Agreement for acquiring the entire shareholding of Springway Mining Private in a phased manner for INR1.8b. (2) ICEM has INR10b of capex plan to put capacity of 2.3mt in the central region by 4QFY21.
• 1HFY19 performance: Volumes grew 15% YoY, with sales growth of 7% YoY. EBITDA/PAT declined 15%/55% YoY. For 2HFY19, we expect volumes to increase 10% YoY, with sales growth of 10% YoY; EBITDA/PAT are expected to decline by 6%/62% YoY.