13 Nov, 2008

PINC has suggested 'buy' on Rain Commodity for the 12-month price target of Rs 300. according to the research report the robust performance of the cement business also inspires confidence in the outlook for the company and hence PINC has revised upwards estimates.

At the current price of  Rs122 the stock is trading at an EV/EBIDT and PE of 3 times and 1.7 times its CY09E earnings. Good demand for CPC coupled with stable RPC prices afford strong margin protection and provide visibility for profits in the near term.

While calcined petroleum coke volumes were stable QoQ at 0.58 mn mt, realisations vaulted 35 per cent QoQ to $420 per million tonne, providing a boost to revenues. Higher cement despatches of 0.61mn mt (+17% QoQ) from its new Kurnool facility coupled with buoyant realisations at Rs4k/mt (+4% QoQ) resulted in healthy jump in revenues from cement division to Rs 230 crore (+22% QoQ).

Sourcing of GPC at competitive rates ($210/mt) enabled Rain to offset the dip in profitability on account of cement operations at the new facility. OPM stood at 30.4 per cent (+490bps QoQ) while operational profits rose 45 per cent QoQ to Rs 400 crore. Despite a charge of Rs 44 crore on account of M-to-M losses on restatement of forex loans, the surge in operational profits was sufficient enough to boost net profits 81 per cent QoQ to Rs 170 crore.