X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 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.
India Cements Vs Madras Cements - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 19, 2003

    India Cements Vs Madras Cements

    Of all the regions that the Indian cement industry is divided into, the southern region hogged the maximum limelight in FY03, unfortunately for all the wrong reasons. With capacity exceeding demand by estimated 11 million tonnes (MT), cement prices fell by average 14% in FY03 thus affecting profitability of all the players in the region. Against this backdrop, let us throw some light on the performance of two of the major cement companies in the south viz. India cements and Madras cements (who continue to focus on the southern markets).

    India cement is the largest producer of cement in the southern region with an estimated capacity of around 9 MT. The company caters to predominantly southern region and some parts of Maharashtra. Madras Cements, on the other hand, has a capacity of nearly 6 MT and caters exclusively to southern markets besides exporting to Sri Lanka (0.4% of unit sales).

    A comparative view…
    Parameter Units India Cements Madras Cements
    Capacity (MT) 9 6
    Net Sales (Rs m) 8,516 6,261
    Interest cost (Rs m) 2,585 662
    Interest coverage ratio (x) 1.4 2.3
    Sales 3 year CAGR (%) -15.4% 8.1%
    Operating ratios      
    EBITDA (%) 3.1% 23.8%
    Net profit margin (%) -23.6% 2.1%
    Valuations      
    Price Rs 27 5,730
    Face Value Rs 10 100
    Mkt.cap/Sales (x) 0.4 1.1
    P/E (x) NA 16.9
    EV/tonne* (US$)** 51 37
    *FY02 data for India cements, 1 US$ - Rs 47

    FY03 was a lacklustre year for both the companies with both under performing the industry in terms of revenue growth. While India Cements posted a 3% growth in cement volumes, Madras Cements saw a 9% growth in volumes. However, the magnitude of fall in prices was higher in Southern region in FY03 due to influx of capacity. As a result, realisations fell sharply (16% for India cements and 11% for Madras cements). If one were to look at the last three years, Madras Cements has been able to grow in line with industry whereas India Cements’ revenues have dropped at a CAGR of around 15%.

    Operating margins of India Cement compares poorly with that of Madras Cement, who is among the most cost efficient players in the industry. Madras Cement has a relative new plant. Secondly, average cost of power, employee and sales are lower for Madras Cements as compared to India Cements. Just to put things in perspective, power cost as a percentage of sales for Madras Cements was 10% whereas the same was 12% for India Cements.

    Significantly high interest burden has also played its part in affecting India Cement’s profitability. As is reflected from the table above, interest coverage is at a concerning level of 1.4 times. The company has been supporting most of its acquisitions with debt and it is currently in the process of restructuring its debt. There are no such worries for Madras cements.

    In view of the strong financials of Madras cements, it enjoys better valuations than India Cements. As far as the future prospects of both are concerned, India cements can hope of a recovery as its proposed debt restructuring program was approved by the CDR (corporate debt restructuring) cell. Restructuring through sale of some cement plants is also on the cards. On the demand front, we expect the southern region to grow in line with the industry. However, price realisation could continue to remain under pressure as top players have strengthened their presence. Given this backdrop, valuations of Madras Cements also seem to be on the higher end of the spectrum.

     

     

    Equitymaster requests your view! Post a comment on "India Cements Vs Madras Cements". Click here!

      
     

    More Views on News

    UltraTech: Post-Acquisition Cement Capacity Augmented to 93 MTPA (Quarterly Results Update - Detailed)

    Aug 11, 2017

    UltraTech Cement completed the acquisition of cement plants of Jaiprakash Associates Limited (JAL) and Jaypee Cement Corporation Limited (JCCL) during the quarter ended June 2017.

    Ambuja Cement: Fall in Other Income Drag Bottomline Lower (Quarterly Results Update - Detailed)

    Aug 11, 2017

    While topline witnessed growth on the back of higher cement sale volumes, a 50.5% YoY fall in other income weighed on Ambuja's bottomline during the quarter ending June 2017.

    ACC: Cementing Growth through Capacity Expansion and Favorable Sectoral Developments (Quarterly Results Update - Detailed)

    Jul 20, 2017

    Expanded capacity helped ACC strengthen its market presence in eastern region during the quarter ended June 2017.

    UltraTech: One of the Weakest Quarters in Years (Quarterly Results Update - Detailed)

    May 18, 2017

    Cement demand was weak because of subdued housing demand, volatile cement prices, and rising fuel costs.

    Ambuja Cem: Net Profits zoom up 361% YoY During Jan-March Quarter (Quarterly Results Update - Detailed)

    May 8, 2017

    Stock price jumps up on Ambuja-ACC merger talks...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    INDIA CEMENTS SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK INDIA CEMENTS

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

    INDIA CEMENTS 8-QTR ANALYSIS

    Detailed Quarterly Results With Charts

    COMPARE INDIA CEMENTS WITH

    MARKET STATS