India Cements Q1 Results Review - Operating Losses Continue In The Cement Segment: Motilal Oswal

Motilal Oswal Report

India Cements Ltd. reported yet another disappointing quarter as its Ebitda dipped 84% YoY to Rs 50 million (versus estimated Rs 362 million). On the other hand, operating loss stood at Rs 91 million in its cement division (versus an Ebitda of Rs 263 million in Q1 FY23; reported losses for the last four quarters).

India Cements' net loss stood at Rs 753 million (versus our estimate of Rs 538 million net loss) during the quarter.

India Cements has engaged Boston Consulting Group, which would suggest measures to improve operational efficiency (to help cost reduction to the tune of Rs 200/tonne by March-24E) at its three plants in Andhra Pradesh.

India Cements has also engaged with equipment experts to refurbish and modernise a few plants to bring efficiency into operations. Its estimated capex for FY24 is Rs 3.5 billion. It also plans to monetise a land parcel of ~Rs 1 billion in Q2 FY24.

We cut our FY24E earnings (Ebitda cut ~40%) considering lower-than expected cost savings in H1 FY24, while we maintain our FY25 estimates.

We reiterate 'Sell' with a target price of Rs 150 (premised on 10.5 times FY25E enterprise value/Ebitda).

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