Visit http://indiaer.blogspot.com/ for complete details For 3QCY2010, Ambuja Cements (Ambuja) reported a 52.2% yoy decline in net
profit due to fall in realisations and increased raw-material and power costs.
However, despatches were higher by 6.1% yoy during the quarter. Going ahead,
we expect Ambuja to report higher growth in despatches, aided by capacity
additions and improvement in demand outlook. At current levels, the stock is
fairly priced, owing to which we maintain our Neutral view on the stock.
Bottom line down 52.2% due to lower realisations and higher power costs:
Ambuja’s standalone top line declined 2.9% yoy during 3QCY2010, in line with
our estimates. The decline was despite a 6.1% yoy increase in despatches to
4.4mn tonnes, aided by capacity additions. However, realisations declined by
8.5% yoy to `3,595/tonne. Ambuja’s OPM declined by 913bp yoy to 19.1% on
account of lower realisation and higher import of high-cost imported coal and pet
coke. Coal imports increased due to lower availability of domestic linkage coal.
Further, increased production of clinker during the quarter resulted in a 38%
increase in power costs, thereby lowering the company’s operating margin.
The bottom line declined by 52.2% yoy to `152cr, well below our estimates.
Outlook and valuation: Over CY2009–11E, we expect Ambuja’s top line to
witness a 7.8% CAGR, with despatches expected to record a 9.2% CAGR on the
back of capacity addition. At current levels, the stock is trading at EV/EBITDA of
10.6x and EV/tonne of US $157 on CY2011E estimates and is fairly priced.
Hence, we maintain our Neutral view on the stock.
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