Lower costs improves India Cements´ Q2
India Cements´ performance for the quarter ended September 2015 was driven largely by lower operational costs. While improved cement prices in south India also helped, the demand uptick still remains a concern. With demand in south Indian states, especially Andhra Pradesh and Telangana, remaining subdued, volumes at 2.16 million tonnes (mt) declined 8.5 per cent year-on-year (y-o-y). Thus, net sales at Rs 1,079 crore declined 4.6 per cent y-o-y and were marginally lower than Bloomberg consensus estimates of Rs 1,085 crore.
It is the decline in imported coal prices and lower diesel costs that led to lower power and fuel as well as transportation and handling costs for India Cements. Thus, the company´s overall costs fell 11 per cent, and boosted its operating performance. Earnings before interest, taxes, depreciation and amortisation (EBIDTA) at Rs 232 crore came much better than the Rs 192 crore estimated by the Street. For a company with high debt, the declining interest rates also proved positive. With interest costs down 13 per cent to Rs 95 crore, the net profit at Rs 41 crore grew more than five-folds over the September 2014 quarter´s Rs 7.5 crore and came 21 per cent higher than estimates of Rs 34 crore.
Following the strong operating performance and profits, India Cements´ stock gained 5.3 per cent on Monday to Rs 83.60. The company had hived off its franchise of Indian Premier League and, hence, the figures of current quarter are not strictly comparable with last year´s. Nevertheless, hiving off of non-core businesses is positive for the company as its performance will now be driven by fundamentals of the cement business.
Going ahead, the firm´s prospects hinge on the revival of cement demand in south India. While on an all-India basis, cement demand had seen a two per cent growth, south India saw a five per cent fall. The capacity utilisations for south India-based cement players also remain lower at about 60 per cent compared to 74 per cent in the rest of India. Cement prices in the south are being managed mainly by production discipline. Not surprisingly, analysts such as those at Nomura say that continuing pricing discipline among the southern players is critical to maintain profitability. The good part is that analysts see some recovery in cement demand in south India from the March 2016 quarter. The new capital of Andhra Pradesh, Amaravati, which is to be developed, and other infrastructure improvement in Telangana are seen as drivers of this demand. In this backdrop and in light of the good September 2015 quarter performance, Shrenik Gujarathi at Angel Broking has a target price of Rs 112 for India Cements.
The company had hived off its franchise of Indian Premier League and, hence, the figures of current quarter are not strictly comparable with last year´s. Nevertheless, hiving off of non-core businesses is positive for the company as its performance will now be driven by fundamentals of the cement business.
In the red! Prism Cement Q2 net loss stands at Rs. 33.26 crore
The company reported total income up 4.5 per cent from operation at Rs.1,398.3 crore as against Rs.1,337.2 crore in the corresponding period last year. Prism Cement Ltd reported net loss at Rs.33.26 crore for the quarter ended September 30, 2015 as compared to Rs.19.76 crore for the same quarter in the previous year.
Prism Cement Ltd is currently trading at Rs. 89.75, down by Rs. 3.8 or 4.06 per cent from its previous closing of Rs. 93.55 on the BSE. The BSE group ´B´ stock of face value Rs. 10 has touched a 52 week high of Rs. 133.6 on 08-Apr-2015 and a 52 week low of Rs. 73.3 on 27-Nov-2014. Last one week high and low of the scrip stood at Rs. 97 and Rs. 91.3 respectively. The promoters holding in the company stood at 74.87 per cent while Institutions and Non-Institutions held 16.42 per cent and 8.7 per cent respectively.
Sourced from India Infoline News Service