Hold India Cements; target of Rs 90: PINC Research

Mumbai : PINC Research has recommended hold rating on India Cements with a target of Rs 90, in its May 31, 2011 research report. “India Cements’ (ICEM) Q4FY11 results were marginally ahead of our expectation with a better sequential growth in realisations. Cement realisations grew 8% QoQ to Rs3,870/mt as against our expectation of Rs3,730/mt. Revenues at Rs10bn were 6% above estimates. The growth in realisations offset the cost pressures as margins expanded 170bps QoQ to 18.1%. Net profits at Rs553mn beat our estimates of Rs480mn.”

“ICEM derives three fourths of its cement volumes from the southern region which has been plagued by over supply and demand slump. AP, a key consuming state, after a decline in FY10 has registered a further de-growth of 17% in FY11. Q4FY11 volumes for ICEM were down 13.4% YoY to 2.5mn mt. However, the company benefitted from higher realisations which improved 20% YoY to Rs3,870/mt and resulted in revenues growth of 2.7% YoY to Rs10bn. The company, which is heavily dependent on imported coal, witnessed an ~20% YoY increase in coal costs. Power tariff also increased in states of Tamil Nadu and AP.