Revenues for the current quarter Q3FY09 are lower than our estimates registering a growth of only 2% y-o-y for Q3FY09 as compared to Q3FY08.
This was led by a decline of 7% in dispatches in the current quarter on account of extended shutdown in two plants.
Revenue growth was boosted to some extent by freight earnings to the tune of Rs164 million, windmill earnings to the tune of Rs7.8 million and IPL earnings to the tune of Rs100 million in Q3FY09.
Operating margins for Q3FY09 registered a decline of 930 basis points and stood at 23.9%, lower than our estimates. This was due to higher power and fuel and other expenditure as compared to Q3FY08.
Net profits registered a decline of 51% due to poor revenue growth, lower operating margins, losses on exchange rate fluctuations as well as higher tax rate as compared to Q3FY08.
At Rs106, stock is trading at 6.1x and 6.8x its P/E multiples on FY09 and FY10 estimates respectively. With downward revision in our estimates, our price target is reduced to Rs109 as against Rs128 earlier based on FY10 estimates.
However on account of limited upside from the current levels, expected decline in cement realizations going forward, concerns regarding translation losses on outstanding FCCBs as well as ongoing down cycle of cement sector, we change our recommendation to REDUCE from Accumulate earlier.