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ICICI Securities Report
India Cements (ICEM) has posted an EBITDA loss for the third consecutive quarter. EBITDA loss in Q4FY23 stood at Rs445mn vs a loss of Rs695 in Q3FY23 and a profit of Rs615mn in Q4FY22. While volumes rose ~5% YoY, weak cement prices and elevated fuel cost got the better of ICEM. The company has posted an EBITDA loss of Rs1.75bn for the full year FY23 - a first in past several years. While fuel cost is visibly easing (pet coke spot rates are down >50% vs the peak of last year) and ICEM is optimistic on cement price improvement, our estimates broadly capture potential gains from the same.
ICEM has embarked on a journey to enhance efficiency and plans to replace old equipment at a few plants over next two years. The capex is likely to be ~Rs6bn and ICEM plans to monetise its surplus land to fund the same. We await concrete steps in that direction. As of now, our concerns of high debt and low ROEs stay put. Hence, we continue to ICEM at 9x FY25E EV/EBITDA and maintain SELL with an unchanged target price of Rs122.
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