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Higher realisation drives profitability…
Mangalam Cement reported net sales of | 134.2 crore and net profit of |
19.5 crore in Q4FY11, which is above our estimate of | 122.1 crore and |
3.2 crore, respectively. Better-than-expected cement realisation in
Q4FY11 and growth in other income helped the company to enhance
the bottomline. The company reported 22% QoQ growth in topline
mainly due to 19% QoQ growth in realisation. This negated the impact
of muted growth in sales volume of 2% QoQ (0.41 MT). The
combination of higher realisation accompanied by a decline in total cost
resulted in exceptional growth in operating profit to | 23.7 crore against
| 2.15 crore in Q3FY11.
�� Muted volume growth
Mangalam Cement has reported blended sales volumes of 0.41 MT,
which declined ~17% YoY on account of muted demand growth
YoY. However, the sales volume improved marginally by 2% QoQ
mainly due to pick up in demand during the quarter.
�� Improved realisation cushions EBITDA/tonne
The EBITDA/tonne increased to | 581 in Q4FY11 as against | 54 per
tonne reported in Q3FY11 mainly due to higher realisation and
marginal increase in total cost. However, the EBITDA per tonne
declined 21% YoY due to ~16% increase in total cost per tonne.
Sequentially, the total cost per tonne increased by a mere 0.3% to |
2712 per tonne with a reduction in P&F and raw material cost.
Valuation
At the CMP of | 123, the stock is trading at 8.5x and 7.9x its FY12E and
FY13E earnings, respectively. It is trading at EV/EBITDA of 4.5x and 4.5x
FY12E and FY13E EBITDA, respectively. On an EV/tonne basis, the stock
is trading at $48 and $37 its FY12E and FY13E capacities, respectively. We
are revising our target price on the stock to | 139 with a BUY rating. At
our target price, the stock is trading at $40 per tonne (~70% discount to
replacement cost of $125 per tonne) at FY13E capacity of 3.25MT
Net sales surge QoQ on higher realisation
Sequentially, net sales spurted by 22% to | 134.2 crore on the back of a
sharp rise in realisation by ~19% at | 3293 per tonne. This negated the
impact of muted sales volume growth of ~2% in Q4FY11. Average
cement prices in the northern region increased by ~12% QoQ to | 245
per bag during Q4FY11. On a YoY basis, net sales declined by 11% YoY
as a rise in blended realisation by 7% YoY at | 3293 per tonne was
completely offset by a decline in blended sales volume (cement and
clinker) by 17% YoY to 0.41 MT.
EBITDA margin expands by 1567 bps QoQ
During Q4FY11, the EBITDA per tonne sharply increased to | 581 per
tonne as against | 54 per tonne reported in Q3FY11, mainly due to flattish
growth in total cost per tonne (0.3%QoQ). Net realisation increased by
19% QoQ. However, on a YoY basis, the EBITDA per tonne declined by
21% due to higher input cost coupled with lower realisations.
The power & fuel (P&F) cost decreased ~24% QoQ (10% YoY) to | 792
per tonne mainly due to increased efficiency of wind power generation,
which partially offset the hike in thermal power cost. The employee cost
declined by 15% QoQ (increased by 49% YoY) to | 186 per tonne as
Q3FY11 was impacted by an increase in wages from April 2010 to
December 2010. On the other hand, raw material cost (excluding stock
adjustments) declined by 27% QoQ (8% YoY) to | 496 per tonne on the
back of an increase in production of fly ash based blended cement. The
freight cost increased by ~12% QoQ (63% YoY) to | 886 per tonne due to
growth in cement dispatches and higher lead distance. Additionally, other
expenses rose 10% QoQ (1% YoY) to | 247 per tonne.
Finally, the total cost per tonne during the quarter remained flat with
marginal upside of 0.3% QoQ (16% YoY) at | 2712 per tonne as against |
2705 per tonne in Q4FY10 mainly due to a decline in power and fuel cost,
raw material cost and employee expenses.
Higher realisation, other income and lower tax outgo boosts bottomline
During Q4FY11, the company reported a net profit of | 19.5 crore as
against a net loss of | 2.5 crore in Q3FY11, as the impact of lower growth
in sales volume was negated by a rise in realisation. In addition, the other
income increased by 58% QoQ (declined by 38% YoY) to | 3.7 crore
while the tax outflow remained as low as | 0.22 crore during Q4FY11 due
to MAT credit entitlement. Additionally, the depreciation cost soared by
~11% YoY to | 7 crore.
Valuations
The company plans to set up a new grinding unit of 1.25 MTPA in Aligarh
(UP), which is expected to be commissioned by Q4FY13. We have
considered a capital outlay of | 400 crore over FY12E and FY13E for the
expansion plan.
At the CMP of | 123, the stock is trading at 8.5x and 7.9x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 4.5x
and 4.5x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $48 and $37 its FY12E and FY13E capacities,
respectively. We are revising our target price on the stock to | 139 per
share with a BUY rating. At our target price, the stock is trading at $40 per
tonne (~70% discount to replacement cost of $125 per tonne) at the
FY13E capacity of 3.25 MT.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Higher realisation drives profitability…
Mangalam Cement reported net sales of | 134.2 crore and net profit of |
19.5 crore in Q4FY11, which is above our estimate of | 122.1 crore and |
3.2 crore, respectively. Better-than-expected cement realisation in
Q4FY11 and growth in other income helped the company to enhance
the bottomline. The company reported 22% QoQ growth in topline
mainly due to 19% QoQ growth in realisation. This negated the impact
of muted growth in sales volume of 2% QoQ (0.41 MT). The
combination of higher realisation accompanied by a decline in total cost
resulted in exceptional growth in operating profit to | 23.7 crore against
| 2.15 crore in Q3FY11.
�� Muted volume growth
Mangalam Cement has reported blended sales volumes of 0.41 MT,
which declined ~17% YoY on account of muted demand growth
YoY. However, the sales volume improved marginally by 2% QoQ
mainly due to pick up in demand during the quarter.
�� Improved realisation cushions EBITDA/tonne
The EBITDA/tonne increased to | 581 in Q4FY11 as against | 54 per
tonne reported in Q3FY11 mainly due to higher realisation and
marginal increase in total cost. However, the EBITDA per tonne
declined 21% YoY due to ~16% increase in total cost per tonne.
Sequentially, the total cost per tonne increased by a mere 0.3% to |
2712 per tonne with a reduction in P&F and raw material cost.
Valuation
At the CMP of | 123, the stock is trading at 8.5x and 7.9x its FY12E and
FY13E earnings, respectively. It is trading at EV/EBITDA of 4.5x and 4.5x
FY12E and FY13E EBITDA, respectively. On an EV/tonne basis, the stock
is trading at $48 and $37 its FY12E and FY13E capacities, respectively. We
are revising our target price on the stock to | 139 with a BUY rating. At
our target price, the stock is trading at $40 per tonne (~70% discount to
replacement cost of $125 per tonne) at FY13E capacity of 3.25MT
Net sales surge QoQ on higher realisation
Sequentially, net sales spurted by 22% to | 134.2 crore on the back of a
sharp rise in realisation by ~19% at | 3293 per tonne. This negated the
impact of muted sales volume growth of ~2% in Q4FY11. Average
cement prices in the northern region increased by ~12% QoQ to | 245
per bag during Q4FY11. On a YoY basis, net sales declined by 11% YoY
as a rise in blended realisation by 7% YoY at | 3293 per tonne was
completely offset by a decline in blended sales volume (cement and
clinker) by 17% YoY to 0.41 MT.
EBITDA margin expands by 1567 bps QoQ
During Q4FY11, the EBITDA per tonne sharply increased to | 581 per
tonne as against | 54 per tonne reported in Q3FY11, mainly due to flattish
growth in total cost per tonne (0.3%QoQ). Net realisation increased by
19% QoQ. However, on a YoY basis, the EBITDA per tonne declined by
21% due to higher input cost coupled with lower realisations.
The power & fuel (P&F) cost decreased ~24% QoQ (10% YoY) to | 792
per tonne mainly due to increased efficiency of wind power generation,
which partially offset the hike in thermal power cost. The employee cost
declined by 15% QoQ (increased by 49% YoY) to | 186 per tonne as
Q3FY11 was impacted by an increase in wages from April 2010 to
December 2010. On the other hand, raw material cost (excluding stock
adjustments) declined by 27% QoQ (8% YoY) to | 496 per tonne on the
back of an increase in production of fly ash based blended cement. The
freight cost increased by ~12% QoQ (63% YoY) to | 886 per tonne due to
growth in cement dispatches and higher lead distance. Additionally, other
expenses rose 10% QoQ (1% YoY) to | 247 per tonne.
Finally, the total cost per tonne during the quarter remained flat with
marginal upside of 0.3% QoQ (16% YoY) at | 2712 per tonne as against |
2705 per tonne in Q4FY10 mainly due to a decline in power and fuel cost,
raw material cost and employee expenses.
Higher realisation, other income and lower tax outgo boosts bottomline
During Q4FY11, the company reported a net profit of | 19.5 crore as
against a net loss of | 2.5 crore in Q3FY11, as the impact of lower growth
in sales volume was negated by a rise in realisation. In addition, the other
income increased by 58% QoQ (declined by 38% YoY) to | 3.7 crore
while the tax outflow remained as low as | 0.22 crore during Q4FY11 due
to MAT credit entitlement. Additionally, the depreciation cost soared by
~11% YoY to | 7 crore.
Valuations
The company plans to set up a new grinding unit of 1.25 MTPA in Aligarh
(UP), which is expected to be commissioned by Q4FY13. We have
considered a capital outlay of | 400 crore over FY12E and FY13E for the
expansion plan.
At the CMP of | 123, the stock is trading at 8.5x and 7.9x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 4.5x
and 4.5x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $48 and $37 its FY12E and FY13E capacities,
respectively. We are revising our target price on the stock to | 139 per
share with a BUY rating. At our target price, the stock is trading at $40 per
tonne (~70% discount to replacement cost of $125 per tonne) at the
FY13E capacity of 3.25 MT.
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