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Ambuja Cements--------------------------------------------------------- Maintain UNDERPERFORM
4Q10: Weak quarter, EBITDA/t declines even sequentially
● 4Q10 pre-exceptional PAT at Rs2.1 bn declined 11% YoY and
was 15% below estimates due to lower margins. EBITDA margin
declined 666 bp YoY and was 528 bp lower than estimates.
Average realisation of Rs3,556/t was 2.4% below estimates.
● Surprisingly, EBITDA/t declined even sequentially from Rs650/t in
3Q10 to Rs626/t in 4Q10, and was 25% lower than our estimate
of Rs837/t. Power and fuel costs went up 34% YoY due to higher
quantity of imported coal. Freight costs were up 5% YoY and are
expected to be higher ahead due to freight hikes in Dec-10.
● Ambuja’s capacity stands at 25 MT and 2 MT additional grinding
capacity is expected to be commissioned in 2011. Management
expects price instability due to demand-supply mismatch and
rising input costs to put pressure on margins in the near term.
● We cut EPS estimates for 2011-12 by 1%/5%, respectively, as we
revise our coal cost and realisations assumptions. Our target price
increases from Rs110 to Rs111. We maintain our
UNDERPERFORM rating on the stock.
Weak 4Q10, results 15% below estimates
4Q10 pre-exceptional PAT at Rs2.1 bn declined 11% YoY and was
15% below estimates due to lower margins. EBITDA margin declined
666 bp YoY and was 528 bp lower than estimates. The company took
tax credit of Rs377 mn for prior years in 4Q10 and also reversed a
portion of taxes paid in 1Q10, due to which effective tax rate for 4Q10
and full-year 2010 stood at 3.9% and 23.8%, respectively. Adjusted
tax rate for 2010 stood at 26.1% and the company expects tax rate to
be 27-28% going forward. For 2010, Rs461 mn (versus Rs526 mn
provisioned earlier in 1Q 2010) was provisioned due to change in
policy for recognising slow moving inventory of spares based on the
age of inventory resulting in exceptional gain of Rs65 mn in 4Q10.
Domestic cement volumes stood at 4.9 MT for 4Q10, rising 2% YoY.
Total volumes stood at 5.0 MT at an average realisation of Rs3,556/t
EBITDA/t even declined QoQ to Rs626/t in 4Q10 and was 25% lower
than our estimate of Rs837/t. Power and fuel costs went up 34% YoY
due to higher quantity of imported coal. Freight costs were up 5% YoY
and are expected to be higher ahead due to freight hikes in Dec-10.
Ambuja’s capacity stands at 25 MT, and 2MT additional grinding
capacity is expected to be commissioned in Bhatapara and Maratha in
2011. Capex of Rs7-8 bn is planned for 2011. In Oct-10, Ambuja
signed an agreement to set up a 2.2 MT clinker unit at Nagaur,
Rajasthan. However, this unit is expected to come only in 2013-14.
Revise EPS estimates, target price of Rs111
We cut EPS estimates for 2011-12 by 1%/5%, respectively, as we
revise our coal cost and realisation assumptions. Our target price
increases from Rs110 to Rs111. We maintain UNDERPERFORM.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ambuja Cements--------------------------------------------------------- Maintain UNDERPERFORM
4Q10: Weak quarter, EBITDA/t declines even sequentially
● 4Q10 pre-exceptional PAT at Rs2.1 bn declined 11% YoY and
was 15% below estimates due to lower margins. EBITDA margin
declined 666 bp YoY and was 528 bp lower than estimates.
Average realisation of Rs3,556/t was 2.4% below estimates.
● Surprisingly, EBITDA/t declined even sequentially from Rs650/t in
3Q10 to Rs626/t in 4Q10, and was 25% lower than our estimate
of Rs837/t. Power and fuel costs went up 34% YoY due to higher
quantity of imported coal. Freight costs were up 5% YoY and are
expected to be higher ahead due to freight hikes in Dec-10.
● Ambuja’s capacity stands at 25 MT and 2 MT additional grinding
capacity is expected to be commissioned in 2011. Management
expects price instability due to demand-supply mismatch and
rising input costs to put pressure on margins in the near term.
● We cut EPS estimates for 2011-12 by 1%/5%, respectively, as we
revise our coal cost and realisations assumptions. Our target price
increases from Rs110 to Rs111. We maintain our
UNDERPERFORM rating on the stock.
Weak 4Q10, results 15% below estimates
4Q10 pre-exceptional PAT at Rs2.1 bn declined 11% YoY and was
15% below estimates due to lower margins. EBITDA margin declined
666 bp YoY and was 528 bp lower than estimates. The company took
tax credit of Rs377 mn for prior years in 4Q10 and also reversed a
portion of taxes paid in 1Q10, due to which effective tax rate for 4Q10
and full-year 2010 stood at 3.9% and 23.8%, respectively. Adjusted
tax rate for 2010 stood at 26.1% and the company expects tax rate to
be 27-28% going forward. For 2010, Rs461 mn (versus Rs526 mn
provisioned earlier in 1Q 2010) was provisioned due to change in
policy for recognising slow moving inventory of spares based on the
age of inventory resulting in exceptional gain of Rs65 mn in 4Q10.
Domestic cement volumes stood at 4.9 MT for 4Q10, rising 2% YoY.
Total volumes stood at 5.0 MT at an average realisation of Rs3,556/t
EBITDA/t even declined QoQ to Rs626/t in 4Q10 and was 25% lower
than our estimate of Rs837/t. Power and fuel costs went up 34% YoY
due to higher quantity of imported coal. Freight costs were up 5% YoY
and are expected to be higher ahead due to freight hikes in Dec-10.
Ambuja’s capacity stands at 25 MT, and 2MT additional grinding
capacity is expected to be commissioned in Bhatapara and Maratha in
2011. Capex of Rs7-8 bn is planned for 2011. In Oct-10, Ambuja
signed an agreement to set up a 2.2 MT clinker unit at Nagaur,
Rajasthan. However, this unit is expected to come only in 2013-14.
Revise EPS estimates, target price of Rs111
We cut EPS estimates for 2011-12 by 1%/5%, respectively, as we
revise our coal cost and realisation assumptions. Our target price
increases from Rs110 to Rs111. We maintain UNDERPERFORM.
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