Madras Cements (MCL) (Q4 FY07) - Result Update

Madras Cements (MCL) – Q4 FY07

CMP: Rs2754
Rating: HOLD
Target: Rs2921

Q4FY07 Financial Highlights

Net Sales increases yoy by 45.1% to Rs4.4bn
Operating profit increases by 100.4% to Rs1.3bn
Operating margin increases by 840 bps to 30.6%
Realiza tion per ton increases by 32% to Rs2923
Cost per ton increases by 17.7% to Rs2028
PAT stood at Rs710mn for Q4FY07 compared to Rs326mn for Q4FY06

Valuation
The series of negative measures for cement industry has reduced the upside possibilities in cement pricing. We expect demand supply situation to be favourable for players in Southern market in FY08 and surplus situation is expected from second of FY09. MCL is expanding its capacity from 6mn tpa to 8mn tpa in FY08 and to 10mn tpa in FY09 which is expected to take care of price moderation in FY09. MCL is putting up 36MW captive power plant in two phases at Jayanthipuram which is expected to bring down power expenditure. We have revised down our estimates for FY08 and FY09 as MCL is unable to pass on the cost in creases. MCL is trading at 9.7x and 9.4x of its estimated FY08 and FY09 earnings of Rs283.5 and Rs292.1 respectively. Recommend HOLD with target price of Rs2921. Our target price discounts estimated FY09 earnings by 10.0x .

Click below for the detailed Result Update:
http://www.indiainfoline.com/content/rep/Result_Analysis/2007/5/3152007/madrascem_0307.pdf

Warm Regards,

J Radhakrishnan
India Infoline ltd

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