India Cement’s Q1 Bottomline Drops 72%

India Cement, a leading producer of cement in South India, announced its Q1FY14 results on August 12, 2013. The company’s revenues have improved by a mere 3% to stand at Rs 1238 crore. Its profits, on the other hand, have declined by 72% and came in at Rs 17 crore for the quarter as against Rs 62 crore in Q1FY13.

The overall expenses of the company have jumped 12% and stood at Rs 1115 crore. The rise in expenses was mainly due to the increase in manufacturing cost, power and fuel cost and higher transportation cost, which rose by 16%, 15% and 19% respectively on a yearly basis.

The EBITDA margins of the company have dropped by 776 basis points to 15.59% as against 23.35% in Q1FY13.

The company has filed an appeal before the Competition Appellate Tribunal against the penalty order by Competition Commission of India and has paid Rs 18.74 crore for the grant of stay.

On a YTD basis, the shares of India Cement have depreciated by 106%. At its CMP Rs 44.30, it is trading at a PE of 11x. One of the core reasons for the decline of stock prices is the IPL controversy in which the Vice Chairman and Managing Director of this company were said to be involved.

The cement sector is bleeding, and all the players in therein are bearing the brunt. The festive season is still ahead, and the sector would take a hammering then too.  Hence, we at DSIJ recommend staying away from this counter.