ICICI Direct’s research report on India Cement
India Cement reported a mixed set of Q4FY19 numbers with topline, volumes beating our estimates but missing estimates on the profitability front. Revenues grew 11.9% YoY to Rs 1564 crore led by 7.8% YoY growth in volumes to 3.33 MT (vs. I-direct estimate of 3.15 MT). Realisations were at ~Rs 4,700/t, up 3.8% YoY (vs. I-direct estimate of ~ Rs 4,645/t). Topline includes Rs 20.25 crore pertaining to subsidy receivable from Rajasthan government (sanctioned to Trinetra Cement that has been merged with India Cement). EBITDA margins witnessed a 95 bps YoY expansion to 12.3% (vs. I-direct estimate of 15.8%), led by higher realisations partly set off by higher input costs (due to one-offs in raw material expenses and employee cost). EBITDA increased 21.2% YoY to Rs 192.2 crore (below I-direct estimate of Rs 231.4 crore) whereas EBITDA/t grew 12.5% YoY to Rs 577/t (below I-direct estimate of Rs 735/t). Consequently, PAT for the quarter increased 24.3% to Rs 43.9 core (below I-direct estimate of Rs 51.3 crore).
Despite EBITDA expected to grow at 12.6% CAGR in FY19-21E, RoCE is expected to remain subdued. Further, high debt levels would continue to stress the balance sheet. Capacity levers are unavailable unless new capacities are announced, which would require two years to get commissioned and may also need to lever the balance sheet further (debt/EBITDA currently at 5.6x for FY19). Hence, we maintain a HOLD rating on India Cement, valuing the company at ~9x FY21E EV/EBITDA.
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