India Cement Q4FY09 pre exceptional net profit of Rs1.08bn is below our estimates of Rs1.32bn mainly on account of higher operational costs. Net revenues for the quarter increased by 5.3% yoy to Rs8.89bn. Performance of the cement division was marred by continuous unscheduled shutdowns and lack of continuous power availability form grids in the state of Andhra Pradesh and Tamilnadu. Consequently cement volumes declined by 5.1% yoy to 2.324 mnt. Cement realization for the quarter stood at Rs3758/ton up 9.1% yoy and 4.8% qoq. On the cost front ICL's raw material costs increased by 34.3% yoy to Rs454/ton (our estimate Rs400/ton). Other expense at Rs1.40bn increased 20.1% yoy (our estimate of Rs1.19bn) on account higher stores and spares and higher maintenance expenditure on plant shutdowns. The only silver lining was in power and fuel cost which witnessed a sequential decline of Rs137/ton to Rs1018/ton, though up 25.7% on a yoy basis. Resultant, operating profit for the quarter declined by 14.8% yoy to Rs2.26bn and was lower than our estimate of Rs2.60bn. EBITDA margin declined by 597bps to 25.4%. On account of higher raw material cost and other expenditure we downgrade our earnings estimates by 7.1% to Rs20.1 for FY2010. We are introducing our FY11E at Rs22/share. At the CMP, the stock is trading at 6.5x FY10E earnings and USD75.5 FY10E capacity. We had price target of Rs139 on ICL and the stock from these levels does not provide significant upside. Also we are awaiting clarity on acqusition of coal mine by ICL in Indonesia and possible equity dilution (ICL board has passed enabling resolution to raise upto USD 100 million). We are revising our rating on the stock from BUY to ACCULUATE and maintain our price target of Rs139.
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