Result Update: The India Cements Ltd - BUY - TP Rs.234 - Kotak

- Results of the company were lower than our estimates and were impacted by issues such as destocking owing to GST implementation, drought and sand mining ban in Tamil Nadu and steep increase in pet coke prices in comparison with last year. Revenues for Q1FY18 are not exactly comparable with last year mainly due to amalgamation of Trinetra Cement and Trishul Concrete Ltd. Revenues are up by 22% YoY led by volume improvement (inc Trinetra Cement) of 15.1% YoY and net realization improvement of 7% YoY. Sharp increase in power and fuel and staff expenses impacted margins and profitability as against our estimates.

- At current market price of Rs 202, stock is trading at 8.2x and 7.0x EV/EBITDA on FY18 and FY19 estimates respectively. We continue to remain positive on the company despite results coming lower than expectations as we believe that post amalgamation, company has realigned its business verticals which would enable it to clean its balance sheet and reduce the loans and advances. Reduced leverage, improved working capital and enhanced capacity coupled with expected improvement in demand in southern region are likely to provide a re-rating to the stock. We maintain our price target of Rs 234 based on average of 8x EV/EBITDA and $80 per tonne on FY19 estimates. Maintain BUY.

Shares of INDIA CEMENTS LTD. was last trading in BSE at Rs.192.75 as compared to the previous close of Rs. 200.7. The total number of shares traded during the day was 689800 in over 5169 trades.

The stock hit an intraday high of Rs. 202 and intraday low of 190.85. The net turnover during the day was Rs. 134987745.

Source : Equity Bulls

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