India Cements (ICL) - Q4FY07

Dear Sir/Madam,

CMP – Rs170

Rating – SELL

Target – Rs177

Q4FY07 Financial Highlights

  • Net Sales increases by 36.2% to Rs5.8bn
  • Operating profit increases by 149.5% to Rs1.9bn
  • Operating margin increases by 1500 bps to 33.1%
  • Realization per ton increases by 32% to Rs2798
  • Cost per ton increases by 7.7% to Rs1872
  • PAT stood at Rs1.4bn for Q4FY07 compared to Rs241mn for Q4FY06

Valuation

We expect ICL to post earnings per share of Rs18.5 and Rs17.7 respectively for FY08 and FY09 without including Visakha Cement figures. At consolidated level including Visaka Cement EPS comes to Rs18.6 and Rs17.5 for FY08 and FY09 respectively. With restriction in pricing power and inflation still continuing at high levels we expect the realization increase to be flat going forward for ICL. There are indications of demand slowing down for housing due to higher interest rates which may reduce demand growth for cement. As the price appreciation possibility is looking limited we maintain our SELL rating on the company.

Warm Regards,

J Radhakrishnan

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