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India Cements Ltd. (ICEM) - Qtr. Update - Dated - August 12, 2013




Axis Capital Limited


12 Aug 2013





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Q1 EBITDA at Rs 1.9 bn (down 31% YoY) was in line with our estimate. Volumes improved 11% YoY to 2.65 mnt despite subdued demand in Southern region due to increased volumes to Maharashtra and Eastern regions. According to the company, proportion of Southern region in overall volumes fell to 76% vs 80% in 1QFY13. High working capital: Net debt at end Q1 was Rs 32 bn, up by Rs 2 bn QoQ. As per management, incremental debt was mainly led by higher working capital requirement. This is due to increased credit period on account of weak demand situation and rising competition. Other highlights  Cement EBITDA/ton for the quarter was Rs 610 vs Rs 635 in 4QFY13 and Rs 1,085 in 1QFY13  Captive coal: The company received the first shipment of coal from its captive Indonesian mine during the quarter. At current coal prices, we don’t expect any savings on account of captive coal production  We retain our EPS estimates for FY14 and FY15 at Rs 7 and Rs 8.8 respectively. However we factor in higher net debt due to higher working capital need and thus reduce our target price to Rs 54 (4.5x FY15 EV/EBITDA) vs Rs 64 earlier. Maintain BUY. At CMP of Rs 44, our target price implies an upside of 22% and the stock trades at 4.8x FY14E EV/EBITDA and 4.2x FY15E EV/EBITDA Regards, Nitesh Jain (Sr VP – Materials) Institutional Equity Research Axis Capital Ltd Tel: +91 22 4325 1145 Jagdishwar Toppo (Executive Director – Materials) Institutional Equity Research Axis Capital Ltd Tel: +91 22 4325 1103 Sujan Sanisetty (Asst VP – Materials) Institutional Equity Research Axis Capital Ltd Tel: +91 22 4325 1122

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