Friday, August 8, 2008

Stock Idea: Mysore Cement

Mysore Cements, earlier an SK Birla company, it is now a subsidiary of Cementrum I. B.V, Netherlands, which is 100% controlled by HeidelbergCement AG.
The financial performance of Mysore Cements can be rated as being just about ok. The company ends its year on 31st December, hence these are the second quarter results for the period ended 30th June 2008. Rise in the costs and inability to increase the prices seems to have impacted the margins.
YoY, net sales was up 20% at Rs.165.78 crore. Operating expense rose 6% and EBITDA was down 10% at Rs.28.45 crore. PBT was down 13% at Rs.24 crore and PAT was down 14% at Rs.23.91 crore. OPM was down from 19.53% to 17.46% and NPM was down from 16.93% to 14.42%. The inability of the company to pass on the soaring costs to the consumers has affected the overall profitability of the company. Companies had voluntary agreed to hold prices as part of the Government measure to cool down the raging inflation.
The net realisations have been down and though the company was able to match the demand with supply, due to inability to increase price, it had to absorb the losses and cut costs. Its overall input costs have been going up by 15-20%. The company cut down on its raw material consumption due to more efficient fuel and power consumption.
The company had initiated a VRS last year and hence its increase in employee cost has been just 2% and now the company is taking all possible cost cutting measures on internal factors, as it has no control on the external factors.
The company has now sought approvals to expand its Clinkerisation capacity front 1.2 MTPA to 3.1 MTPA at Madhya Pradesh, expand its cement grinding capacity Uttar Pradesh and Madhya Pradesh. It also seeks to expand its cement manufacturing capacity from 0.4 MTPA to 1.2 MTPA at Karnataka. It has placed some orders of machinery and expects the expanded plant in Karnataka to go on stream by 2010 and that in Madhya Pradesh and Uttar Pradesh by 2011. Its capacity by 2011 will thus stand increased from the present 2.1 million tonnes, to 6 million tonnes.
Cement stocks have been on the buyers since the past few days and that is because the markets expect the cement companies to hike their prices once the monsoon season is over and by then, demand is also expected to pick up. Currently quoted near its low of Rs.25 at Rs.34, stay invested.


The information in this publication is provided by is intended for use for Readers & Traders . Every effort is made to provide accurate information, but cannot guarantee the accuracy of the information or of the market analysis. This is a newsletter and is for informational purposes only. It is not a solicitation or offer to buy or sell futures. There is a high risk of loss in trading futures. You should not trade with money that you cannot afford to lose. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this newsletter. The past performance of any trading system or methodology is not necessarily indicative of future results.

free counter