Raysut Cement Co -Equity Report -07-06-2012

1Q12 Results: Increase in profits and double digit growth in revenues
Raysut Cement Company (RCC) recorded a 21.8% increase in top line to OMR24.6mn as sales volume increased 20%. This resulted in a 37.4% increase in profits reaching OMR6.8mn as compared to OMR5.0mn registered in 1Q11. Gross margins bounced strongly and witnessed a 240bps rise to 32.3% while net margins rose by 320bps to 27.8%. The increase in profits is attributed to better sales volume and higher price realization in Oman, amid a stiff competition from UAE cement companies.

Valuation update
We have upgraded our fair value to OMR1.376/share after incorporating improved cement demand forecast for 2012-15 in our model. Despite upgrading our fair value the recommendation has not changed due to 49.2% increase in share price in the last 3 months. The stock at its current price of OMR1.333 is trading at a discount of 3.3% to our fair value. We therefore maintain HOLD recommendation on the stock.