RK Damani portfolio stock: Huge downside seen! Why brokerages are bearish on India Cements?

India Cements reported below than expected earnings in the quarter ended March 31, 2022. Cement company reported standalone a net loss of Rs 23.71 crore in the January-March quarter. The loss, as per the company, was due to an increase in the cost of input materials together with the loss of volume.  

Brokerage firms have been bearish on India Cements and see up to 58% downside in the counter on May 27 closing price of Rs 163 per share.  

As per the March shareholding of the company, billionaire investor Radhakishan Damani holds 12.7% stake in Indian Cements comprising 39,281,694 shares of the cement stock. 

As per Yes Securities, which gave a 'reduce' rating on India Cements with target price of Rs 146 per share, the weak performance of the company was due to low blending and rise in cement prices, which further severely affected the margin. This was a downside of 10% on Friday's closing price of Rs 163 per share. 

"Weak performance was majorly due to the decline in 12% y/y volume due to extended monsoon coupled with steep surge in total cost in Q4FY22. Therefore, the inflated fuel/diesel cost will erode the EBITDA further in FY23E,"it said, adding the improvement of capacity utilization going forward would generate better free cash flow.  

Saying concerns bogging down ICEM (of high net debt/EBITDA and low RoEs) are not just long-standing, but sticky, Edelweiss Research reduced the target price from Rs 126 to Rs 103. " With weak earnings offering limited scope for any relief, we maintain ‘REDUCE/SU’ with a TP of INR103 (down from INR126),"it said.  

Motilal Oswal says that lack of capacity additions has led to significant market share loss for the company. Saying lower realization and higher opex than estimate led to earnings miss, it maintained neutral rating on the cement scrip. The target price set by the brokerage was Rs 155, below 5% on Friday's closing price.  

As per the latest corporate shareholdings, Radhakishan Damani publicly holds 14 stocks in the quarter ended March 2022. The value of these stocks is estimated to be over Rs 173,052 crore as on May 31, as per trendlyne.com