CCIL came out with Q4FY09 results which were below our expectation.

CCIL reported a Net Sales of Rs 60.96 Crs in Q4 FY 09 as against Rs 52.08 Crs in Q4 FY 08 an increase of
17.1% on YoY basis. The company reported a Net Sales of Rs 221.71 Crs for FY 09 as against Rs 170.85 Crs during FY 08 an increase of 29.8%.

The company reported an EBIDTA of Rs 3.56 Crs in Q4 FY 09 as against Rs 8.87 Crs in Q4 FY 08 a decline of
60% on YoY basis. The company reported an EBIDTA of Rs 21.28 Crs during FY 09 as against Rs 26.22 Crs in FY 08 a decline of 18.8%.

The company reported an EBIDTA Margin of 5.84% in Q4FY09 as against 17.03% in Q4FY08 a decrease of
1119 bps YoY basis. The company reported an EBIDTA margin of 9.60% during FY 09 as against 15.35% during FY 08 a decline of 575 bps. The decline in margins was mainly due to the increased cost of raw material which happened on account of sharp fluctuation in price of commodities like Copper & Steel which constitute almost 80% of the raw materials for cables. CCIL book the material against order at higher price but had to offer lower price to customer when prices decline. This has resulted into higher raw material cost for CCIL.

The company reported an Other Income of Rs 0.38 Crs in Q4 FY 09 as against Rs 0.48 Crs in Q4 FY 08 a decline of 20.8 % on YoY basis. The company reported an Other Income of Rs 1.09 Crs n FY 09 as against Rs 0.7 Crs in FY 08 an increase of 55.7%.

The interest was up 57.8% on YoY basis. The company reported a Net Interest of Rs 8.39 Crs in FY 09 as against Rs 4.93 Crs in FY 08 an increase of 70.2%. The higher interest was on account of higher working capital required by the company.

The depreciation was up 190.6% on YoY basis. The company reported depreciation of Rs 2.86 Crs during FY 09 as against Rs
0.88 Crs in FY 08 an increase of 225%. The increase in Depreciation charges was because of the capex done by the company during the year.

The company reported a PAT of Rs 0.1 Crs in Q4FY09 as against Rs 4.79 Crs in Q4FY 08 a decline of 97.9% YoY basis. The company reported a PAT of Rs 7.13 Crs in FY
09 as against Rs
13.76 Crs in FY 08 a decline of 48.2%.

The company reported a PAT margin of 0.16% in Q4FY09 as against 9.20% in Q4FY08 a decline of 904 bps YoY basis. The company reported a PAT Margin of 3.22% during FY 09 as against 8.05% during FY 08 a decline of 483 bps.

The company reported an EPS of Rs 0.09 for Q4 FY 09 as against Rs 4.19 in Q4 FY 08 a decline of 97.9% YoY basis. The company reported an EPS of Rs 6.24 in FY 09 as against Rs 12.04 during FY 08 a decline of 48.2%.

Expansion Plans CCIL is constantly investing to increase the capacity. The expansion plans were held up last year due to land dispute. The land for expansion was awarded to CCIL by RIICL. There was some dispute about the ownership of the land between the Govt of Rajasthan and the community occupying the same. In the meanwhile the company had already received machinery which CCIL installed in the existing facility and has already started producing. The Govt of Rajasthan has already provided CCIL with a new land area and the company has started expansion on the same.

Order Book: As of 31st Mar 2009 CCIL had an order book of Rs 103 Crs. The company is not facing any problem in order booking. The order booking is same quantity wise but the value of the order book is low due to the declining prices of the raw materials.

Exports: CCIL is focusing aggressively on export markets and as a result the company increased the share of exports to 16.1% in FY 09 as against 7% in FY08. In addition to this the company is planning to increase the share to 25% in FY 10.

Valuation & Outlook We expect CCIL to report Net Revenue of Rs 265 Crs, EBIDTA of Rs 29.6 Crs, EBIDTA Margin of 11.2%, PAT of Rs 11.1 Crs and EPS of Rs 9.7 in FY10. At the estimated EPS of Rs 9.7 for FY 10 the stock is trading at Price Earning Multiple of 3.7x.

Considering CCIL reasonable order book, focus on exports, pick up in demand and stable commodity prices we expect CCIL’s margin to improve in the coming quarters. We recommend to HOLD the stock.