Emkay Global Financial is bearish on India Cements has recommended sell rating on the stock with a target price of Rs 69 in its research report dated June 24, 2020.
Emkay Global Financial's report on India Cements
ICEM’s Q4 results were significantly below estimates, dragged by lower-than-estimated realization, higher opex and losses in the infrastructure segment. EBITDA stood at Rs675mn vs. estimated Rs1.42bn and EBITDA/ton was at Rs289 vs. estimate of Rs539. Key negatives: 1) 5.2% yoy decline in realization/ton (flat qoq), 2) 4.6% qoq increase in Opex/ton despite reduction in variable costs (11% yoy/3.7% qoq), 3) Loss of Rs112.9mn in the infrastructure segment, d) Rs2.8bn increase in gross debt in FY20. Cement prices have improved significantly in the South region from Apr’20 and the management expects higher prices to sustain. ICEM did not give any volume guidance in the current scenario. Capex plans will be kept on hold as of now.
Outlook
We raise FY21E EBITDA by 19% and FY22/23E EBITDA by 7%/6% on higher sales volumes/realization. The inability to deleverage balance sheet even in the absence of capacity remains an overhang. We maintain Sell with a revised TP of Rs69.
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