India Cements Ltd (Q1 FY11) – MP (Target Rs104, Downside 1.0%)

CMP Rs105, Target Rs104, Downside 1.0%

• In Q1 FY11, India Cements Ltd (ICL) posted revenue de-growth of 7.4% yoy, below our expectation of a flat yoy growth. Dismal cement demand-supply scenario in South (95% of ICL market share) led to a sharp drop in average realization for ICL. Net realisation for the quarter stood at Rs163/bag down 17% yoy, worse than our estimate of ~12%. The share of central rights income pertaining to IPL was not considered during the quarter resulting in a lower income from the IPL segment. 
  
• ICL’s OPM nosedived to ~12% v/s 30% in Q1 FY10 (down 18ppts). Depressing operational performance was on back of lower realization and increase in fuel cost as international coal prices soared to US$99 (average of the quarter) v/s US$60 in Q1 FY10.