8 November 2020
2QFY21 Results Update | Sector: Cement
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
TP: INR120 (-2%)
Beneficiary of South production discipline
Market share loss the key concern
37.7 / 0.5
140 / 69
Financial Snapshot (INR b)
EBITDA Margin (%)
Adj. EPS (INR)
EPS Gr. (%)
Div. Yield (%)
India Cements (ICEM)’s 2QFY21 results highlight the benefit of high
cement prices in South India, which led to the highest EBITDA/t since
FY14 – at INR1,114/t (+102% YoY). Volumes, however, declined 21% YoY
due to weak cement demand in South India and market share loss.
We raise our FY21/FY22E EPS by 28%/2%, factoring in a strong realization
outlook on the back of a strong production discipline in South. However,
we retain our
rating on expected market share loss and a
valuation of 9.4x FY22E EV/EBITDA, pricing in strong margins.
Strong pricing drives 59% YoY EBITDA growth
Revenue/EBITDA/PAT at INR10.7b/INR2.3b/INR0.7b was -14%/+59%/14x
YoY – 3%/11%/33% above our estimate.
Volumes declined 21% YoY to 2.11mt (est. 2.0mt) as demand in South
was impacted by heavy monsoons, prolonged lockdowns, and higher
Realization was up 9% YoY to INR5,077/t (our est. INR5,206/t). This led to
a 102% YoY increase in EBITDA/t to INR1,114/t – the highest since FY14.
Per ton cost fell 4% YoY to INR3,963/t (-6% QoQ), weighed by 12% YoY
decline in power and fuel cost and 14% YoY drop in other expenses due
to lower fixed costs (such as maintenance, ad spends, and travel).
OCF was at INR3.1b in 1HFY21 (v/s INR1.6b in 1HFY20).
1HFY21 rev/EBITDA/PAT stood at INR18.3b/INR3.9b/INR0.9b, with YoY
change of -33%/0%/+16%. Volumes were down 38% YoY.
Shareholding pattern (%)
Highlights from management commentary
FII Includes depository receipts
Sales volumes were at 2.11mt (v/s 2.67mt in 2QFY20). Capacity
utilization was up to 53% in 2QFY21 from 35% in 1QFY21. The trade sales
mix was at 54% and is expected to go up to 58% in 3QFY21. The PPC mix
stood at 63%.
The company aims to sell higher volumes in markets situated closer to its
plants, thereby reducing freight cost.
In 1HFY21, industry in South declined 29% YoY in volumes on account of
prolonged lockdown and heavy monsoons. On the other hand, prices
have been strong, and the company expects sustained pricing discipline
It repaid debt of INR1.18b in 1HFY21 and would repay INR3.0b in
It is focused on improving capacity utilization, while continuing to
monitoring the demand-supply situation in Central India. It would
accordingly take a call on the planned Damoh expansion.
Amit Murarka - Research analyst
Basant Joshi - Research analyst
Investors are advised to refer through important disclosures made at the last page of the Research Report.
3 September 2019
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.