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UBS Investment Research
Ambuja Cements Limited
Results below expectation
Q4CY10 EBITDA margin at 17.6% is lower than Q3 margin of ~18%
Ambuja reported Q4CY10 consolidated net sales of Rs17.9bn (+1% y/y, +14%
q/q) and operating profit of Rs3.1bn (-28% y/y, +11% q/q; below UBS-e of
Rs4.5bn and consensus estimate of Rs4.1bn). Recurring PAT at Rs2.1bn (-11%
y/y, +41% q/q) was in-line with our estimate (below consensus estimate of
Rs2.4bn), mainly on account of lower taxes (CY10 effective tax rate of ~27%).
Miss in estimates led by lower realizations
Cement realisations (net) declined ~3% YoY in Q4 to Rs3,549/T and for CY10
they were down 2% YoY to Rs3,695/T. Q4CY10 volumes were at 5mt (+4% y/y,
+16% q/q) and CY10 volumes increased 6.4% y/y to 20mt. Installed capacity will
increase from ~25mt currently to ~27mt in CY11 as the company commissions its
grinding units at Bhatpara and Maratha plants.
Cost per ton in Q4 have remained flat quarter on quarter
Q4CY10 cost per ton at Rs2,924 is flat on a QoQ basis, though it has increased by
about 7% over 9mCY10 figures. Ebitda/T has declined by ~4% q/q led by lower
realizations. Cost per ton in CY10 has also remained flat on a YoY basis, though
this is driven by clinker savings (clinker production increased by 23% YoY in
CY10 as Ambuja commissioned two kilns this year while it had substantial clinker
purchases last year; all other cost items have shown an increase).
Valuation: maintain Sell
We value Ambuja at a one-year forward EV/EBITDA of 6.5x. We are cautious on
the near-term outlook for the cement sector in India and maintain our Sell rating
Ambuja Cements Limited
Ambuja Cements has 26.5mt installed capacity and 75% of its total capacity is
in the western and northern regions of India. Controlled by the Holcim Group (a
46% stakeholder), it is one of the most efficient cement producers in the country.
Statement of Risk
We believe the principal risk to cement companies earning estimates arises from
fall in cement prices and rise in raw material prices.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Ambuja Cements Limited
Results below expectation
Q4CY10 EBITDA margin at 17.6% is lower than Q3 margin of ~18%
Ambuja reported Q4CY10 consolidated net sales of Rs17.9bn (+1% y/y, +14%
q/q) and operating profit of Rs3.1bn (-28% y/y, +11% q/q; below UBS-e of
Rs4.5bn and consensus estimate of Rs4.1bn). Recurring PAT at Rs2.1bn (-11%
y/y, +41% q/q) was in-line with our estimate (below consensus estimate of
Rs2.4bn), mainly on account of lower taxes (CY10 effective tax rate of ~27%).
Miss in estimates led by lower realizations
Cement realisations (net) declined ~3% YoY in Q4 to Rs3,549/T and for CY10
they were down 2% YoY to Rs3,695/T. Q4CY10 volumes were at 5mt (+4% y/y,
+16% q/q) and CY10 volumes increased 6.4% y/y to 20mt. Installed capacity will
increase from ~25mt currently to ~27mt in CY11 as the company commissions its
grinding units at Bhatpara and Maratha plants.
Cost per ton in Q4 have remained flat quarter on quarter
Q4CY10 cost per ton at Rs2,924 is flat on a QoQ basis, though it has increased by
about 7% over 9mCY10 figures. Ebitda/T has declined by ~4% q/q led by lower
realizations. Cost per ton in CY10 has also remained flat on a YoY basis, though
this is driven by clinker savings (clinker production increased by 23% YoY in
CY10 as Ambuja commissioned two kilns this year while it had substantial clinker
purchases last year; all other cost items have shown an increase).
Valuation: maintain Sell
We value Ambuja at a one-year forward EV/EBITDA of 6.5x. We are cautious on
the near-term outlook for the cement sector in India and maintain our Sell rating
Ambuja Cements Limited
Ambuja Cements has 26.5mt installed capacity and 75% of its total capacity is
in the western and northern regions of India. Controlled by the Holcim Group (a
46% stakeholder), it is one of the most efficient cement producers in the country.
Statement of Risk
We believe the principal risk to cement companies earning estimates arises from
fall in cement prices and rise in raw material prices.
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