India Cements :: Angel Broking Diwali Top Picks (Diwali Muharat)

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 India Cements is the largest cement player in south India and the fifth largest
player in India, with an installed capacity of 13.1 MTPA in south India and overall
total capacity of 15.6 MTPA (pan India). The company derives 85-90% of its revenue
from south India. Due to excess capacity in south India and political instability in
Andhra Pradesh, the demand for cement in the south region had been weak in the
past couple of years. Now, with the Telangana issue being resolved and demand
picking up in the region, we expect overall utilization levels to improve going forward.
 The pricing environment in south India continues to remain stable despite a sharp
increase in the previous quarter. As per the Management, prices are expected to increase
further post monsoons, which should lead to an improvement in margins in future.
 At the current market price of `108 the stock is available at trailing EV/tonne of
$63, which is at a large discount to its other midcap peers. Given the improving
macroeconomic scenario, stable pricing and expected pickup in demand, we are
positive on India Cements and value it at EV/tonne of $75 on FY2016E installed capacity.
WWWe arrive at a price target of e arrive at a price target of ```146, ie an upside of 35% from the current levels. 146, ie an upside of 35% from the current levels.