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| India Infoline Research Team / 12:14 , Nov 15, 2010 |
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CMP Rs116, Target Rs126, Upside 8.6%
- Revenue de-grew by 15.3%, in-line with our estimates. The fall in topline was largely due to drop in realizations, which stood at Rs3,115/ton, down by 20% yoy.
- OPM contracted by ~27ppts at 3.6%, below our estimate. The worse than expected decline in margin was due to a surge in international coal prices (up 30-40% yoy basis), which led to higher power and fuel cost.
- Lower topline coupled with weak operating performance resulted in ICL reporting a pre-exceptional loss of Rs449mn (against our expectation of Rs57mn).
- Trades close to fair value; Upgrade to Market Performer with a revised price target of Rs126. We value ICL cement business at US$75 EV/ton or Rs95/share for FY11E. This reflects a discount to Ambuja Cement (US$180-EV/Ton for CY11), as ICL will earn only ~20% of its FY10 profits in FY11E. Further, the company may have to raise fresh debt to fund its FCCB obligation due in March 2011.
Result table
| (Rs m) |
Q2 FY11 |
Q2 FY10 |
% yoy |
Q1 FY11 |
% qoq |
| Net sales |
8,428 |
9,949 |
(15.3) |
8,828 |
(4.5) |
| Material costs |
(1,409) |
(1,168) |
20.6 |
(1,163) |
21.1 |
| Personnel costs |
(603) |
(598) |
0.8 |
(630) |
(4.3) |
| Power and fuel costs |
(2,617) |
(2,442) |
7.2 |
(2,751) |
(4.9) |
| Freight cost |
(1,861) |
(1,459) |
27.6 |
(1,838) |
1.3 |
| Other overheads |
(1,635) |
(1,250) |
30.8 |
(1,424) |
14.8 |
| Operating profit |
303 |
3,032 |
(90.0) |
1,022 |
(70.3) |
| OPM (%) |
3.6 |
30.5 |
-2688 bps |
11.6 |
-798 bps |
| Depreciation |
(610) |
(572) |
6.6 |
(599) |
1.9 |
| Interest |
(280) |
(374) |
(25.2) |
(298) |
(6.0) |
| Other income |
6 |
- |
- |
264 |
(97.6) |
| PBT |
(580) |
2,086 |
(127.8) |
389 |
(248.9) |
| Tax |
131 |
(704) |
(118.6) |
(24) |
(645.8) |
| Effective tax rate (%) |
(22.6) |
(33.8) |
1116 bps |
(6.2) |
-1643 bps |
| Exceptional Item |
113 |
(13) |
- |
(116) |
- |
| Reported PAT |
(449) |
1,382 |
(132.5) |
365 |
(222.9) |
| Adjusted PAT |
(336) |
1,369 |
(124.6) |
250 |
(234.6) |
| Adj. PAT margin (%) |
(4.0) |
13.8 |
-1775 bps |
2.8 |
-682 bps |
| Ann. EPS (Rs) |
(4.4) |
19.4 |
-123% |
3.5 |
-224% |
Valuation Summary
| Y/e 31 Dec (Rs m) |
FY09 |
FY10 |
FY11E |
FY12E |
| Revenues |
34,290 |
38,054 |
37,038 |
41,884 |
| yoy growth (%) |
12.5 |
11.0 |
(2.7) |
13.1 |
| Operating profit |
9,213 |
8,607 |
4,602 |
7,268 |
| OPM (%) |
26.9 |
22.6 |
12.4 |
17.4 |
| Pre-exceptional PAT |
5,018 |
3,138 |
611 |
2,146 |
| Reported PAT |
4,224 |
3,574 |
611 |
2,146 |
| yoy growth (%) |
(34.2) |
(15.4) |
(82.9) |
251.0 |
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| EPS (Rs) |
17.8 |
10.2 |
2.0 |
7.0 |
| P/E (x) |
6.5 |
11.4 |
58.3 |
16.6 |
| Price/Book (x) |
0.9 |
0.9 |
0.9 |
0.8 |
| EV/EBITDA (x) |
5.6 |
6.3 |
12.7 |
8.2 |
| Debt/Equity (x) |
0.6 |
0.5 |
0.6 |
0.5 |
| RoE (%) |
14.8 |
8.2 |
1.5 |
5.1 |
| RoCE (%) |
15.2 |
10.1 |
3.4 |
6.7 | Source: Company, India Infoline Research
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