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Earnings above estimates; cost control drives EBITDA beat

* India Cements’ (ICEM) 1QFY27 EBITDA increased ~90% YoY to INR1.6b (~47% beat), led by lower-than-estimated opex/t. EBITDA/t grew ~61% YoY to INR604 (vs. est. INR424). OPM surged 7.3pp YoY to ~15% (vs. est. ~11). PAT (adjusted for net impact of profit on sale of assets and provision for disputed liabilities for earlier years) stood at INR455m vs. a loss of INR75m in 1QFY26.

* ICEM’s operating performance has improved materially in the last one year, aided by cost efficiencies and improvement in capacity utilization. Cost efficiencies were driven by higher clinker conversion ratio (1.53x vs. 1.42x YoY), renewable power share (12.3% vs. 8.5%), reduction in power consumption/t of cement (~78 kwh vs. ~85 kwh) and positive operating leverage. Capacity utilization stood at ~70% vs. ~59% in 1QFY26. ICEM has completed the migration of its product brands to the brand portfolio of UTCEM, which leads to a wider scale and distribution network.

* We have raised our EBITDA estimates for FY27/FY28 by ~13%/3%, factoring in better margins, led by higher cost benefits. We value ICEM at 14x FY28E EV/EBITDA to arrive at a TP of INR350. Maintain Sell.

Volume up ~18% YoY; EBITDA/t at INR604 (est. INR424)

* ICEM’s revenue declined ~1% YoY to INR10.2b (in line). Volume rose ~18% YoY (+3% vs. estimate) to 2.6mt. Realization/t (net of freight) was up ~2% YoY/1% QoQ (~2% below our estimate).

* Opex/t declined ~23% YoY (~6% below estimate). Other expense/t declined ~18% YoY, led by benefits of brand transition in marketing cost and positive operating leverage. Employee costs declined ~23% YoY to INR476m. Variable cost/t inched up ~3% YoY (down ~1% QoQ) due to high fuel prices. Fuel cost per kcal stood at INR1.96 vs. INR1.70/INR1.75 in 1Q/4QFY26. Its petcoke share in fuel mix was 22% vs. 71%/48% in 1Q/4QFY26. EBITDA/t rose ~61% YoY to INR604. Other income declined 64% YoY. Adjusted PAT stood at INR455m vs. a loss of INR75m in 1QFY26.

* Net debt stood at INR15.4b vs. INR12.7b as of Mar’26.

Valuation and view

* ICEM’s profitability has improved sequentially in the past couple of quarters, led by high volume and cost efficiencies. It has taken various initiatives such as conversion of four/five-stage preheaters to six-stage preheaters, cooler upgrades, process optimization, increasing RE share and synergies from holding company (UTCEM). It is expanding grinding capacity by 2.8mtpa.

* We estimate EBITDA CAGR of ~53% over FY26-28 and EBITDA/t of INR568/ INR750 in FY27E/FY28E vs. INR385 in FY26.We believe the current valuation at 16x FY28E EV/EBITDA prices in most of operational improvements, which are expected due to this transition, and hence limit any further scope of rerating. We value ICEM at 14x FY28E EV/EBITDA to arrive at our TP of INR350. Reiterate Sell.

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