Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Madras Cem: Tepid growth, profits drop - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Madras Cem: Tepid growth, profits drop

May 31, 2013

Madras Cements has announced its financial results for the quarter ended March 2013. The company has reported a rise of 6% YoY in net sales and 35% YoY decline in net profits. Here is our analysis of the results:

Performance Summary
  • Revenues rise by 5.5% YoY during the quarter ended March 2013 (4QFY13).
  • Operating profits decline by 28.8% YoY. Operating margins decline from 22.5% in 4QFY12 to 15.2% in 4QFY13 owing to higher energy, logistics and other expenses.
  • At the bottomline level, net profits drop by 35.3% YoY during the quarter.
  • During the full financial year ended March 2013 (FY13), net sales and net profits increased by 18.3% YoY and 4.8% YoY respectively.
  • The company's board of directors has declared a final dividend of Re 1 per share for FY13.

Financial performance snapshot
(Rs m) 4QFY12 4QFY13 Change FY12 FY13 Change
Net sales 8,788 9,272 5.5% 32,030 37,884 18.3%
Expenditure 6,811 7,866 15.5% 22,867 28,249 23.5%
Operating profit (EBITDA) 1,976 1,407 -28.8% 9,163 9,635 5.2%
EBITDA margin 22.5% 15.2%   28.6% 25.4%  
Other income 334 337 1.1% 536 842 57.1%
Depreciation 659 581 -11.9% 2,539 2,806 10.5%
Interest 310 307 -0.9% 1,585 1,785 12.7%
Profit before tax 1,341 857 -36.1% 5,575 5,887 5.6%
Tax 350 215 -38.5% 1,723 1846 7.1%
Effective tax rate 26.1% 25.1%   30.9% 31.4%  
Profit after tax 992 642 -35.3% 3,852 4,041 4.9%
Extraordinary gains/ (loss) (1) (0.1) -90.0% (1) (5) 370.0%
Net profit 991 641 -35.3% 3,851 4,036 4.8%
Net profit margin 11.3% 6.9%   12.0% 10.7%  
No of shares (m)       238.0 238.0  
Diluted EPS (Rs)*         17.0  
P/E (times)*         13.1  
*trailing twelve month earnings

What has driven performance in 4QFY13?
  • Madras Cements reported a topline growth of 5.5% YoY during the quarter ended March 2013 (4QFY13). The company has not provided volume details for the quarter.

  • Operating expenses grew at a higher rate of 15.5% YoY. All major cost heads witnessed significant inflationary pressures during the quarter. It must be noted that other expenditure includes Rs 42.7 m towards net loss on forex fluctuations and Rs 327.5 m towards CSR activities. As a result, the company's operating (EBITDA) margins declined by 730 basis points (7.3%) from 22.5% in 4QFY12 to 15.2% in 4QFY13.

    Operating cost break-up
    (Rs m) 4QFY12 4QFY13 Change
    Raw Material Consumption 1,420 1,531 7.8%
    % of net sales 16.2% 16.5%  
    Employee Cost   436 511 17.1%
    % of net sales 5.0% 5.5%  
    Power & Fuel 1,745 1,939 11.1%
    % of net sales 19.9% 20.9%  
    Transportation & Handling 1,857 2,245 20.9%
    % of net sales 21.1% 24.2%  
    Other Expenditure 1,353 1,640 21.2%
    % of net sales 15.4% 17.7%  
    Total operating expenditure 6,811 7,866 15.5%
    % of net sales 77.5% 84.8%  

  • While depreciation charges declined by 11.9% YOY during the quarter, other income and interest expenses were almost as the same level as the corresponding quarter of the previous financial year.

  • Led by weak operating performance, the company's net profits for the quarter declined by 35.3% YoY. Net profit margins declined by about 440 basis points from 11.3% in 4QFY13 against 6.9% in 4QFY12.

  • During the full financial year, the company's sales and net profits grew by 18.3% YoY and 4.8% YoY respectively. Net profit margins declined from 12% in FY12 to 10.7% in FY13.

  • The company's board has approved a final dividend of Re 1 per share for the financial year 2012-13. Along with the interim dividend of Rs 2 per share, the total dividend for FY13 amounts to Rs 3 per share. At the current price level, this translates to a dividend yield of 1.3%.

What we expect?

Madras Cements reported muted topline growth during the quarter owing to the overall sluggishness in the cement sector. Margins were also impacted by high operating costs. While cement demand is likely to remain subdued in the short to medium term, we expect cement demand to grow at about 7-8% over the next few years.

At the current prices of Rs 223 the stock is trading at 13.1 times its trailing twelve month earnings. We maintain our 'Sell' view on the stock from a 2-year perspective.

To Read the Full Story, Subscribe or Sign In
To Read the Full Story, Subscribe or Sign In

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms


Mar 26, 2019 (Close)


  • Track your investment in THE RAMCO CEMENTS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks