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Ambuja Cement: Realisation falls, cost rise dents margins…
During Q4CY10, Ambuja Cement reported net sales of | 1788.5 crore (up
1% YoY and 14.4% QoQ) and EBITDA of | 314.6 crore that was below
our respective estimates of | 1878.6 crore and | 411.1 crore on account
of lower than expected realisation. Net profit of | 252 crore (up 3% YoY,
66% QoQ) was above our estimate of | 238.1 crore on account of tax
write-back during the quarter. The operating margin declined by 717
bps YoY (51 bps QoQ down) to 18% on account of ~4% YoY decline in
realisation (1.3% decline QoQ) and 5% YoY increase in total cost per
tonne. The company has increased its capacity to 26 MTPA after
commissioning of the 4.4 MTPA of clinker units and 3 MTPA of grinding
units. We expect volume growth of 8% CAGR (CY09-12E). Going
forward, we expect realisations to improve in CY11E and CY12E by 3%
YoY and 5% YoY, respectively. However, increasing input costs would
keep margins under pressure.
Sales volume up but poor prices/bag hit realisation
Ambuja Cement reported sales volumes of 5 MT that increased by
5.4% YoY and 16% QoQ. However, net realisations took a hit of
4.2%YoY (1.3% QoQ) to | 3549 per tonne mainly due to subdued
pricing scenario.
EBITDA per tonne declines 32% YoY and 4.1% QoQ
The EBITDA per tonne declined by 32% YoY to | 624 on account of
a decline in realisations coupled with an increase in total cost by 5%
YoY to | 2924 per tonne. The increase in total cost was mainly due
to an increase in power & fuel cost and employee cost. On a QoQ
basis, the EBITDA per tonne declined 4.1%. Thus, the EBITDA
margin declined by 717 bps YoY and 51 bps QoQ to 18%.
Valuation
At the CMP of | 120, the stock is trading at 16.3x and 14.6x its CY11E and
CY12E earnings, respectively. The stock is trading at an EV/EBITDA of
8.5x and 7.1x CY11E and CY12E EBITDA, respectively. On EV/tonne, the
stock is trading at $131 and $122 its CY11E and CY12E capacities,
respectively. We are assigning an ADD rating to the stock with a revised
target price of | 122 per share. At the target price, the stock is trading at
$125 per tonne at CY12E capacity, which is the current replacement cost.
Net sales increase ~14% QoQ; flat on a YoY basis
During the quarter, net sales increased marginally by 1% YoY (14.4%
QoQ) to | 1788.5 crore in the wake of 5.4% YoY (16% QoQ) growth in
sales volume to 5 MT during Q4CY10. However, the growth in sales
volume was partially offset by the drop in net realisation, which reported
a decline of 4.2% YoY (1.3% QoQ) to | 3549/tonne. The sequential growth
in sales volume was led by the post festival pick-up in construction
activity while the decline in realisation was due to the fall in cement prices
in the northern, central and eastern regions during the quarter where the
company sells a majority of its volume.
EBITDA margin declines 717 bps YoY, 51 bps QoQ
EBITDA margin took a hit of 717 bps YoY to 18% from a rise in total cost
by 5% YoY to | 2924/tonne and drop in realisation by 4.2% YoY.
Sequentially, margin was almost flat (down only 51 bps) as the drop in
realisation by 1.3% QoQ was negated by drop in total cost by ~1% QoQ.
The raw material cost reported a significant decline of 34.1% YoY to | 293
per tonne on account of a significant decline in clinker purchases by the
company. However, the raw material cost surged 6.1% QoQ on a
sequential basis. The power & fuel cost increased 29.4% YoY to | 885 on
account of lower availability of linkage coal and higher international coal
prices. However, it decreased 13% QoQ on usage of imported coal that
was procured during Q4CY10. The freight cost, on the other hand, surged
2.2% YoY (3% QoQ) to | 809 on higher transportation cost that rose due
to transporters strikes at its Himachal Pradesh plants. The other
expenditure increased 7.1% YoY to | 748 per tonne on account of an
increase in repair & maintenance costs while it declined 3.1% QoQ. The
employee expenses increased ~2% YoY to | 154 while it reported a
decline of 32% QoQ.
Hence, the total cost increased by 5% YoY | 2924 per tonne while it
reported a marginal decline of ~1% on a sequential basis. After providing
for all major expenses, the EBITDA per tonne declined 32% YoY and
4.1% QoQ to | 624 per tonne.
Sequentially, net profit takes a leap on higher other income and tax benefits
The adjusted net profit surged 3% YoY (~66% QoQ) to | 252 crore on
account of growth in other income by 36.3% YoY (55% QoQ) to | 77
crore, tax write-back of | 37 crore and exceptional item of | 6 crore during
Q4CY10. However, depreciation and interest charges rose ~7% and
~133% QoQ to | 109 crore and | 21 crore, respectively. On a YoY basis,
depreciation and interest charges surged 26% and 277% respectively
Valuations
Ambuja has increased its capacity to 26 MTPA after the commissioning of
the 4.4 MTPA of clinker units and 3 MTPA of grinding units. We expect
volume growth of 8% CAGR over CY09-11E. Also, with this the company
would be able to reduce its clinker purchase cost. However, increasing
coal and freight costs are expected to put pressure on margins.
At the CMP of | 120, the stock is trading at 16.3x and 14.6x its CY11E and
CY12E earnings, respectively. The stock is trading at an EV/EBITDA of
8.5x and 7.1x CY11E and CY12E EBITDA, respectively. On EV/tonne, the
stock is trading at $131 and $122 its CY11E and CY12E capacities,
respectively. We are assigning an ADD rating to the stock with a revised
target price of | 122 per share. At the target price, the stock is trading at
$125 per tonne at CY12E capacity, which is the current replacement cost.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ambuja Cement: Realisation falls, cost rise dents margins…
During Q4CY10, Ambuja Cement reported net sales of | 1788.5 crore (up
1% YoY and 14.4% QoQ) and EBITDA of | 314.6 crore that was below
our respective estimates of | 1878.6 crore and | 411.1 crore on account
of lower than expected realisation. Net profit of | 252 crore (up 3% YoY,
66% QoQ) was above our estimate of | 238.1 crore on account of tax
write-back during the quarter. The operating margin declined by 717
bps YoY (51 bps QoQ down) to 18% on account of ~4% YoY decline in
realisation (1.3% decline QoQ) and 5% YoY increase in total cost per
tonne. The company has increased its capacity to 26 MTPA after
commissioning of the 4.4 MTPA of clinker units and 3 MTPA of grinding
units. We expect volume growth of 8% CAGR (CY09-12E). Going
forward, we expect realisations to improve in CY11E and CY12E by 3%
YoY and 5% YoY, respectively. However, increasing input costs would
keep margins under pressure.
Sales volume up but poor prices/bag hit realisation
Ambuja Cement reported sales volumes of 5 MT that increased by
5.4% YoY and 16% QoQ. However, net realisations took a hit of
4.2%YoY (1.3% QoQ) to | 3549 per tonne mainly due to subdued
pricing scenario.
EBITDA per tonne declines 32% YoY and 4.1% QoQ
The EBITDA per tonne declined by 32% YoY to | 624 on account of
a decline in realisations coupled with an increase in total cost by 5%
YoY to | 2924 per tonne. The increase in total cost was mainly due
to an increase in power & fuel cost and employee cost. On a QoQ
basis, the EBITDA per tonne declined 4.1%. Thus, the EBITDA
margin declined by 717 bps YoY and 51 bps QoQ to 18%.
Valuation
At the CMP of | 120, the stock is trading at 16.3x and 14.6x its CY11E and
CY12E earnings, respectively. The stock is trading at an EV/EBITDA of
8.5x and 7.1x CY11E and CY12E EBITDA, respectively. On EV/tonne, the
stock is trading at $131 and $122 its CY11E and CY12E capacities,
respectively. We are assigning an ADD rating to the stock with a revised
target price of | 122 per share. At the target price, the stock is trading at
$125 per tonne at CY12E capacity, which is the current replacement cost.
Net sales increase ~14% QoQ; flat on a YoY basis
During the quarter, net sales increased marginally by 1% YoY (14.4%
QoQ) to | 1788.5 crore in the wake of 5.4% YoY (16% QoQ) growth in
sales volume to 5 MT during Q4CY10. However, the growth in sales
volume was partially offset by the drop in net realisation, which reported
a decline of 4.2% YoY (1.3% QoQ) to | 3549/tonne. The sequential growth
in sales volume was led by the post festival pick-up in construction
activity while the decline in realisation was due to the fall in cement prices
in the northern, central and eastern regions during the quarter where the
company sells a majority of its volume.
EBITDA margin declines 717 bps YoY, 51 bps QoQ
EBITDA margin took a hit of 717 bps YoY to 18% from a rise in total cost
by 5% YoY to | 2924/tonne and drop in realisation by 4.2% YoY.
Sequentially, margin was almost flat (down only 51 bps) as the drop in
realisation by 1.3% QoQ was negated by drop in total cost by ~1% QoQ.
The raw material cost reported a significant decline of 34.1% YoY to | 293
per tonne on account of a significant decline in clinker purchases by the
company. However, the raw material cost surged 6.1% QoQ on a
sequential basis. The power & fuel cost increased 29.4% YoY to | 885 on
account of lower availability of linkage coal and higher international coal
prices. However, it decreased 13% QoQ on usage of imported coal that
was procured during Q4CY10. The freight cost, on the other hand, surged
2.2% YoY (3% QoQ) to | 809 on higher transportation cost that rose due
to transporters strikes at its Himachal Pradesh plants. The other
expenditure increased 7.1% YoY to | 748 per tonne on account of an
increase in repair & maintenance costs while it declined 3.1% QoQ. The
employee expenses increased ~2% YoY to | 154 while it reported a
decline of 32% QoQ.
Hence, the total cost increased by 5% YoY | 2924 per tonne while it
reported a marginal decline of ~1% on a sequential basis. After providing
for all major expenses, the EBITDA per tonne declined 32% YoY and
4.1% QoQ to | 624 per tonne.
Sequentially, net profit takes a leap on higher other income and tax benefits
The adjusted net profit surged 3% YoY (~66% QoQ) to | 252 crore on
account of growth in other income by 36.3% YoY (55% QoQ) to | 77
crore, tax write-back of | 37 crore and exceptional item of | 6 crore during
Q4CY10. However, depreciation and interest charges rose ~7% and
~133% QoQ to | 109 crore and | 21 crore, respectively. On a YoY basis,
depreciation and interest charges surged 26% and 277% respectively
Valuations
Ambuja has increased its capacity to 26 MTPA after the commissioning of
the 4.4 MTPA of clinker units and 3 MTPA of grinding units. We expect
volume growth of 8% CAGR over CY09-11E. Also, with this the company
would be able to reduce its clinker purchase cost. However, increasing
coal and freight costs are expected to put pressure on margins.
At the CMP of | 120, the stock is trading at 16.3x and 14.6x its CY11E and
CY12E earnings, respectively. The stock is trading at an EV/EBITDA of
8.5x and 7.1x CY11E and CY12E EBITDA, respectively. On EV/tonne, the
stock is trading at $131 and $122 its CY11E and CY12E capacities,
respectively. We are assigning an ADD rating to the stock with a revised
target price of | 122 per share. At the target price, the stock is trading at
$125 per tonne at CY12E capacity, which is the current replacement cost.
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