Madras Cements’ Q4FY2008 revenues grew 21.8% year-on-year to Rs530 crore. The operating profit margin (OPM) improved by 40 basis points y-o-y to 31% on account of a increase in realizations. The operating profit rose by 23.4% to Rs164.4 crore.
During the quarter, the realization per tonne increased by 15.8% to Rs3,468 per tonne, the cost per tonne grew by 17.2% to Rs2,371.2 per tonne, while EBIDTA per tonne rose by 12.8% to Rs1,097 per tonne.
Going forward, the topline growth will be driven primarily by the volume growth on the back of capacity additions being carried out by the company. However, we have revised our profit estimates for FY2009 downwards to factor in the higher input cost, and now expect the company’s net profit to grow at 5.3% y-o-y.
We have also introduced FY2010 earning estimates in this note and expect the company’s net profit to grow 16.6% y-o-y in FY2010.
At the current market price of Rs2,712, the share trades at 7.5x and 6.4x its FY2009 and FY2010 earnings respectively and an enterprise value (EV)/EBIDTA of 5.7x and 4x for FY2009 and FY2010 respectively. We maintain our BUY recommendation with a revised price target of Rs4,000.