India Cements Ltd: Maintains buy rating with a target of Rs 134

SummaryWe maintain our target of Rs 134.50 arrived based both on replacement costs and EV/EBIDTA on a differential weightage and with a BUY rating.The results for the Q4FY12 have been above our estimates, however, the contribution from growth in volumes remained muted. Contrary to this strong pricing trend has helped company post good numbers. The demand for cement during the March’12 was muted in southern India especially in Andhra Pradesh.

We expect the demand for cement to pick up from May’12 and remain strong till start of monsoon. However, owing to recent intervention by CCI on cartelisation we don’t expect a strong up tick in cement prices in Q1FY13. We believe that RBI’s move (50bps cut in repo) might trigger demand from housing and industrial segment in the near term.

Coal production at Indonesian mines expected to commence operation from Q1FY13 might help company in reducing its coal costs and also with recent commissioning of its new 50 MW captive power plant at Sankari Nagar to aid ICL in further reducing the power and fuel costs.



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