>DALMIA CEMENT (ICICI DIRECT)

Sugar business drives bottomline...

Dalmia Cement Q1FY10 results were broadly inline with our expectations. Net profit grew 16.1% YoY and 32.3% QoQ basis. For Dalmia cements given the restricted presence in the Southern region and likely expectation of an over supply scenario in south which will translate into low return ratios, we maintain our HOLD rating on the stock.

Highlight of the quarter
Net sales grew 32.9% YoY to Rs 551.7 crore in Q1FY10 from Rs 415.0 crore in Q1FY09 due to higher cement and sugar volumes. The EBITDA margin has declined by 180 bps YoY to 27.8% primarily due to decline in margins from cement business. EBITDA has reported YoY growth of 24.7% to Rs 153.4 crore. The growth in EBITDA was mainly contributed by Sugar division. Interest expense have increase by 19.2% YoY to Rs 41 crore while depreciation has increase by 50.8% to Rs 30.2 crore due to capitalizations of Andhra Pradesh (AP) Plant The net profit has reported growth of 16.1% YoY and 32.3% QoQ to Rs 58.6 crores.

Valuations
At the CMP of Rs 141 per share, the stock is trading at 6.4x and 6.3x its FY10E and FY11E earnings, respectively. The stock is trading at 4.4x and 4x EV/EBIDTA. Given the restricted presence in the Southern region and likely expectation of an over supply scenario in south which will translate into low return ratios, we maintain our Hold rating on the stock with price target of Rs
130.

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