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Low realisation dents profitability…
Mangalam Cement reported net sales of | 109.7 crore in Q3FY11, which
is in line with our estimate of | 109 crore. During the quarter, it reported
a net loss of | 2.5 crore against our loss estimate of | 0.2 crore on
account of lower than expected other income and higher than expected
increase in input costs. The sales volume declined ~7% YoY mainly due
to a decline in December 2010 dispatches number in the wake of the
Gujjar agitation, which caused a disruption in rail services on the KotaDelhi route. The combination of falling sales volume accompanied by
poor pricing condition in the quarter resulted in a fall in operating profit
by ~95% YoY and ~28% QoQ to | 2.2 crore as against | 43.6 crore in
Q3FY10 and | 3 crore in Q2FY11. Hence, OPM declined by 2755 bps YoY
and 63 bps QoQ to 2% in Q3FY11 as the net realisation dipped ~20.2%
YoY and ~10% QoQ to | 2698 per tonne.
ƒ Disruption in dispatches due to Gujjar agitation in Rajasthan
Mangalam Cement has reported blended sales volumes of 0.41 MT,
which declined ~7% YoY as dispatches of cement were adversely
affected due to the disruption in rail services on the Kota-Delhi route
on account of the Gujjar agitation.
ƒ Lower realisations hit EBITDA/tonne significantly
The company reported EBITDA/tonne of | 53, which declined by
~95% YoY (~32% QoQ) on a ~20% YoY (~10% QoQ) decline in
realisation and ~11% YoY increase in total cost per tonne.
Sequentially, the total cost per tonne dipped ~9% due to a
reduction in P&F and freight cost.
Valuation
At the CMP of | 117, the stock is trading at 10x and 7.2x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 3.7x
and 3.0x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $27 and $28 its FY11E and FY12E capacities,
respectively. We are revising our target price on the stock to | 136 per
share with a BUY rating. At our target price, the stock is trading at $35 per
tonne (70% discount to replacement cost of $125 per tonne) at FY13E
capacity of 2MT.
Net sales decline 25.6% YoY and 4.4% QoQ
Net sales have declined 25.6% YoY to | 109.7 crore in Q3FY11 as the
blended sales volume (cement and clinker) declined ~7% YoY to 0.41 MT
and blended realisation declined ~20% YoY to | 2698 per tonne.
Sequentially, net sales declined 4.4% QoQ on the back of ~10% drop in
realisation. The negative impact on sales volume during the quarter was
on account of lower dispatches of cement bags in December 2010 due to
the Gujjar agitation in Rajasthan, which caused a disruption in rail services
on the Kota-Delhi route.
EBITDA margin declines by 2755 bps YoY and 63 bps QoQ
The EBITDA margin shrunk by 2755 bps YoY to 2% due to ~20% YoY
decline in realisation and 11% YoY hike in total cost per tonne. On a QoQ
basis, the margin has shrunk by 63 bps mainly due to a decline in
realisation by ~10% QoQ.
The power & fuel (P&F) cost increased ~9% YoY to | 1018 per tonne.
However, sequentially it declined ~8% mainly due to a decline in coal
cost to | 3894/tonne in Q3FY11 from | 4388/tonne in Q2FY11. Besides,
the freight cost declined ~0.3% YoY and ~10% QoQ to | 777 per tonne
due to lower cement dispatches through rail route in the wake of the
Gujjar agitation in Rajasthan. On the other hand, raw material cost
increased 17.5% YoY (7.5% QoQ) to | 666 per tonne backed by an
increase in prices of key raw material like limestone, gypsum and iron
ore. The employee cost significantly rose ~59% YoY and 17.6% QoQ to |
214 per tonne as the company provided increase in wages from April
2010 to December 2010 aggregating | 1.9 crore. Besides, other expenses
rose 24.4% YoY to | 219 per tonne while it reported a decline of ~17%
QoQ.
Thus, the total cost per tonne during the quarter increased 11% YoY to |
2645 per tonne as against | 2382 per tonne in Q3FY10. However, it
declined ~9%QoQ due to a sequential decline in freight and power & fuel
costs.
Lower realisation with decline in sales volume takes toll on bottomline
The company reported a net loss of | 2.5 crore as against net profit of |
26.8 crore in Q3FY10 and | 0.9 crore in Q2FY11 respectively. Lower sales
volumes, due to the Gujjar agitation in Rajasthan and lower realisations
on lower per bag prices in the company’s selling market pulled down the
bottomline of the company. Following the trend, other income also
dipped ~52% YoY at | 2.3 crore while interest charges increased 118%
YoY to | 0.8 crore due to interest paid on income tax for the earlier year.
Additionally, depreciation cost soared by ~11% YoY to | 7 crore.
Valuations
The company has decided to defer the plan for setting up a new unit of
1.75 MTPA of cement manufacturing capacity at the existing site.
Previously, we factored this expansion plan to reach the valuation.
Considering the deferment of the upcoming facility we are revising our
estimates for FY11E EPS and FY12E EPS | 7.2 and | 9.4, respectively.
At the CMP of | 117, the stock is trading at 10x and 7.2x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 3.7x
and 3.0x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $27 and $28 its FY11E and FY12E capacities,
respectively. We are revising our target price on the stock to | 136 per
share with a BUY rating. At our target price, the stock is trading at $35 per
tonne (70% discount to replacement cost of $125 per tonne) at FY13E
capacity of 2MT.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Low realisation dents profitability…
Mangalam Cement reported net sales of | 109.7 crore in Q3FY11, which
is in line with our estimate of | 109 crore. During the quarter, it reported
a net loss of | 2.5 crore against our loss estimate of | 0.2 crore on
account of lower than expected other income and higher than expected
increase in input costs. The sales volume declined ~7% YoY mainly due
to a decline in December 2010 dispatches number in the wake of the
Gujjar agitation, which caused a disruption in rail services on the KotaDelhi route. The combination of falling sales volume accompanied by
poor pricing condition in the quarter resulted in a fall in operating profit
by ~95% YoY and ~28% QoQ to | 2.2 crore as against | 43.6 crore in
Q3FY10 and | 3 crore in Q2FY11. Hence, OPM declined by 2755 bps YoY
and 63 bps QoQ to 2% in Q3FY11 as the net realisation dipped ~20.2%
YoY and ~10% QoQ to | 2698 per tonne.
ƒ Disruption in dispatches due to Gujjar agitation in Rajasthan
Mangalam Cement has reported blended sales volumes of 0.41 MT,
which declined ~7% YoY as dispatches of cement were adversely
affected due to the disruption in rail services on the Kota-Delhi route
on account of the Gujjar agitation.
ƒ Lower realisations hit EBITDA/tonne significantly
The company reported EBITDA/tonne of | 53, which declined by
~95% YoY (~32% QoQ) on a ~20% YoY (~10% QoQ) decline in
realisation and ~11% YoY increase in total cost per tonne.
Sequentially, the total cost per tonne dipped ~9% due to a
reduction in P&F and freight cost.
Valuation
At the CMP of | 117, the stock is trading at 10x and 7.2x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 3.7x
and 3.0x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $27 and $28 its FY11E and FY12E capacities,
respectively. We are revising our target price on the stock to | 136 per
share with a BUY rating. At our target price, the stock is trading at $35 per
tonne (70% discount to replacement cost of $125 per tonne) at FY13E
capacity of 2MT.
Net sales decline 25.6% YoY and 4.4% QoQ
Net sales have declined 25.6% YoY to | 109.7 crore in Q3FY11 as the
blended sales volume (cement and clinker) declined ~7% YoY to 0.41 MT
and blended realisation declined ~20% YoY to | 2698 per tonne.
Sequentially, net sales declined 4.4% QoQ on the back of ~10% drop in
realisation. The negative impact on sales volume during the quarter was
on account of lower dispatches of cement bags in December 2010 due to
the Gujjar agitation in Rajasthan, which caused a disruption in rail services
on the Kota-Delhi route.
EBITDA margin declines by 2755 bps YoY and 63 bps QoQ
The EBITDA margin shrunk by 2755 bps YoY to 2% due to ~20% YoY
decline in realisation and 11% YoY hike in total cost per tonne. On a QoQ
basis, the margin has shrunk by 63 bps mainly due to a decline in
realisation by ~10% QoQ.
The power & fuel (P&F) cost increased ~9% YoY to | 1018 per tonne.
However, sequentially it declined ~8% mainly due to a decline in coal
cost to | 3894/tonne in Q3FY11 from | 4388/tonne in Q2FY11. Besides,
the freight cost declined ~0.3% YoY and ~10% QoQ to | 777 per tonne
due to lower cement dispatches through rail route in the wake of the
Gujjar agitation in Rajasthan. On the other hand, raw material cost
increased 17.5% YoY (7.5% QoQ) to | 666 per tonne backed by an
increase in prices of key raw material like limestone, gypsum and iron
ore. The employee cost significantly rose ~59% YoY and 17.6% QoQ to |
214 per tonne as the company provided increase in wages from April
2010 to December 2010 aggregating | 1.9 crore. Besides, other expenses
rose 24.4% YoY to | 219 per tonne while it reported a decline of ~17%
QoQ.
Thus, the total cost per tonne during the quarter increased 11% YoY to |
2645 per tonne as against | 2382 per tonne in Q3FY10. However, it
declined ~9%QoQ due to a sequential decline in freight and power & fuel
costs.
Lower realisation with decline in sales volume takes toll on bottomline
The company reported a net loss of | 2.5 crore as against net profit of |
26.8 crore in Q3FY10 and | 0.9 crore in Q2FY11 respectively. Lower sales
volumes, due to the Gujjar agitation in Rajasthan and lower realisations
on lower per bag prices in the company’s selling market pulled down the
bottomline of the company. Following the trend, other income also
dipped ~52% YoY at | 2.3 crore while interest charges increased 118%
YoY to | 0.8 crore due to interest paid on income tax for the earlier year.
Additionally, depreciation cost soared by ~11% YoY to | 7 crore.
Valuations
The company has decided to defer the plan for setting up a new unit of
1.75 MTPA of cement manufacturing capacity at the existing site.
Previously, we factored this expansion plan to reach the valuation.
Considering the deferment of the upcoming facility we are revising our
estimates for FY11E EPS and FY12E EPS | 7.2 and | 9.4, respectively.
At the CMP of | 117, the stock is trading at 10x and 7.2x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 3.7x
and 3.0x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $27 and $28 its FY11E and FY12E capacities,
respectively. We are revising our target price on the stock to | 136 per
share with a BUY rating. At our target price, the stock is trading at $35 per
tonne (70% discount to replacement cost of $125 per tonne) at FY13E
capacity of 2MT.
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