Company Update : India Cements by Motilal Oswal Financial Services Ltd
Cost controls encouraging; EBITDA/t at INR376 (est. INR292)
* India Cement (ICEM)’s revenue increased 5% YoY to INR10.2b in 1QFY26. It reported EBITDA of INR819m (~21% beat), backed by strong cost control. OPM stood at ~8% (vs. estimate of ~6%). The company reported a net loss of INR138m (vs. our estimate of net loss of INR276m) compared to INR736m in 4QFY25.
* Following its acquisition by UTCEM in 4QFY25, ICEM implemented significant cost-control measures, resulting in a variable cost reduction of INR500/t over the last two quarters, a ~29% reduction in employee costs, ~12% decline in freight cost/t, and ~20% decline in other expenses/t. Overall; opex/t declined INR918/t during 3QFY25-1QFY26.
* Realization in 1QFY26 increased only ~4% QoQ (lower than our estimate of ~12% increase). However, it grew ~9% over 3QFY25-1QFY26, while net plant realization rose ~15% during the same period.
Volume up ~11% YoY, realization down 5% YoY (up 4% QoQ)
* ICEM’s revenue increased ~5% YoY to INR10.2b in 1QFY26 (~13% miss). It reported EBITDA of INR819m vs. operating loss of INR310m in 1QFY25. Its sales volume increased ~11% YoY to 2.2mt (down ~17% QoQ; ~6% miss). OPM expanded 11.2pp YoY to ~8%. It reported a net loss of INR138m vs. a net loss of INR1.6b in 1QFY25.
* Blended realization/t declined ~5% YoY to INR4,700 (up 4% QoQ; ~7% miss). Variable cost/other expenses/freight cost per ton declined 11%/18%/14% YoY. Employee cost declined 31% YoY. Opex/t declined ~15% YoY to INR4,324 (~9% below our estimate). Depreciation increased 34% YoY, while interest costs declined ~60% YoY.
Key takeaways from the press release
* The company is targeting to increase WHRS capacity to 30MW by FY27, vs. 9MW currently, and other renewable power capacity to 221MW by FY27, vs. 20MW currently. It targets to scale up its green power share to 86% by FY27 from 5% currently. It expects efficiency gains from planned capex over the next two years to start reflecting from 4QFY27.
* Trade/non-trade mix stood at ~55%/45%. Direct sales stood at ~66%. The company’s capacity utilization stood at ~61% in 1QFY26 vs. 73% 4QFY25.
Valuation and view
* ICEM’s operating performance improved sequentially, led by improvement in realization (strong price hike witnessed in its core markets) and cost control initiatives under the new management.
* We have a SELL rating on the stock and will review our assumptions after the UTCEM concall on 21st Jul’25 at 4:00 pm. (Link)
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