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High realisation, cost saving drive bottomline…
Ambuja Cement reported net sales of | 2207 crore (up 10% YoY and 23%
QoQ), in line with our estimate of | 2190 crore. Reported EBITDA and PAT
of | 612 crore (down 2% YoY, up 94% QoQ) and | 407 crore (down 9%
YoY, up 62% QoQ) were ahead of our respective estimates of | 506 crore
and | 319 crore on account of lower than expected power & fuel cost, raw
material cost and others cost. The operating margin improved
significantly by 1012 bps QoQ to 27.7% on account of ~10% QoQ
increase in realisation and ~4% QoQ decline in total cost per tonne. The
company has increased its capacity to 27 MTPA after commissioning of 5
MTPA of grinding units. We expect volume growth of 8% CAGR (CY10-
12E). Going forward, we expect realisations to improve in CY11E and
CY12E by 5% YoY each. However, increasing input costs would keep
margins under pressure.
Sales volume up ~12% QoQ, realisation up ~10% QoQ
Ambuja Cement reported sales volumes of 5.66 MT that increased
by ~7% YoY and ~12% QoQ. Net realisation increased by ~3%YoY
and ~10% QoQ to | 3899 per tonne mainly due to an increase in
prices across all regions during the quarter.
EBITDA per tonne improves 73% QoQ
Sequentially, the EBITDA per tonne has improved significantly by
~73% to | 1081 on account of ~10% increase in realisations
coupled with ~4% decline in total cost. The decline in total cost was
mainly due to savings in power & fuel cost, raw material cost and
others cost. Thus, the EBITDA margin has improved by 1012 bps
QoQ to 27.7%. On a YoY basis, the EBITDA per tonne declined by
~8% on account of higher costs.
Valuation
At the CMP of | 150, the stock is trading at 20.1x and 17.5x its CY11E and
CY12E earnings, respectively. The stock is trading at an EV/EBITDA of
10.7x and 8.9x CY11E and CY12E EBITDA, respectively. On an EV/tonne
basis, the stock is trading at $169 and $154 its CY11E and CY12E
capacities, respectively. We are assigning a HOLD rating to the stock with
a revised target price of | 139 per share on the basis of valuation of $140
per tonne at CY12E capacity of 27 MTPA.
Net sales increase on better volume and realisations
During the quarter, net sales increased by 11% YoY (23% QoQ) to |
2207.1 crore on account of an increase in sales volume by ~7% YoY
(~12% QoQ) to 5.66 MT and improvement in realisation by ~12% YoY
(~10% QoQ) to | 3899 per tonne. The volume growth was supported by
capacity additions by the company coupled with a pick-up in demand and
increase in utilisation rate during the quarter.
EBITDA margin improves 1012 bps QoQ on realisation improvement with cost savings
The raw material cost reported a significant decline of ~27% YoY (~13%
QoQ) to | 255 per tonne on account of a significant decline in clinker
purchases by the company. The power & fuel cost increased ~26% YoY
to | 851 per tonne on account of an increase in coal and petcoke prices.
However, the cost has declined by ~4% QoQ on account of an increase
in efficiency of captive power plants. The freight cost, on the other hand,
surged ~15% YoY (11% QoQ) to | 899 on increase in fright rates. The
other expenditure increased ~23% YoY to | 676 per tonne on account of
an increase in repair & maintenance costs while it declined by ~10%
QoQ. The employee expenses increased ~14% YoY (~9% QoQ) to | 167
per tonne.
Hence, the total cost increased by ~9% YoY | 2819 per tonne while it
reported a decline of ~4% on a sequential basis. The EBITDA per tonne
declined 8.5% YoY but improved significantly by ~73% QoQ to | 1081
per tonne.
Sequentially, the EBITDA margin has improved by 1012 bps to 27.7% in
Q1CY11 as against 17.6% in Q4CY10. However, the margin has declined
by 358 bps YoY on account of higher cost.
Sequentially, net profit surges on significant improvement in operating margin
On a YoY basis, the net profit has declined by ~9% to | 407.5 crore on
account of a decline in operating margin, increase in depreciation cost by
~38% and increase in interest cost by ~28%. However, on a sequential
basis, the net profit jumped by ~62% on the back of a significant
improvement in operating margin by 1012 bps and ~33% QoQ decline in
interest cost.
Capex plan
Ambuja has increased its capacity to 27 MTPA after the commissioning of
two 1.5 MTPA grinding units at Dadri (Uttar Pradesh) and Nalagarh
(Himachal Pradesh) and 2 MTPA cement grinding units at Bhatapara
(Chhattisgarh) and Maratha (Maharashtra). During Q1CY10, the company
commissioned two clinker units of 2.2 MTPA each at Bhatapara and Rauri.
In October 2010, the company has signed an agreement with the
Rajasthan State Industrial Development and Investment Corporation, to
set up a 2.2 MTPA clinkerisation unit in Nagpur district. Pre project
planning is at an advanced stage and construction is expected to start by
Q3CY11.
Valuations
We expect volume growth of 8% CAGR over CY10-12E. Realisations are
expected to increase by 5% YoY each in CY11E and CY12E. However, an
increase in coal cost and freight cost would keep margins under pressure.
We estimate EBITDA per tonne of | 857 in CY11E and | 914 in CY12E
against | 912 in CY10.
At the CMP of | 150, the stock is trading at 20.1x and 17.5x its CY11E and
CY12E earnings, respectively. The stock is trading at an EV/EBITDA of
10.7x and 8.9x CY11E and CY12E EBITDA, respectively. On an EV/tonne
basis, the stock is trading at $169 and $154 its CY11E and CY12E
capacities, respectively. We are assigning a HOLD rating to the stock with
a revised target price of | 139 per share on the basis of valuation of $140
per tonne at CY12E capacity of 27 MTPA.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
High realisation, cost saving drive bottomline…
Ambuja Cement reported net sales of | 2207 crore (up 10% YoY and 23%
QoQ), in line with our estimate of | 2190 crore. Reported EBITDA and PAT
of | 612 crore (down 2% YoY, up 94% QoQ) and | 407 crore (down 9%
YoY, up 62% QoQ) were ahead of our respective estimates of | 506 crore
and | 319 crore on account of lower than expected power & fuel cost, raw
material cost and others cost. The operating margin improved
significantly by 1012 bps QoQ to 27.7% on account of ~10% QoQ
increase in realisation and ~4% QoQ decline in total cost per tonne. The
company has increased its capacity to 27 MTPA after commissioning of 5
MTPA of grinding units. We expect volume growth of 8% CAGR (CY10-
12E). Going forward, we expect realisations to improve in CY11E and
CY12E by 5% YoY each. However, increasing input costs would keep
margins under pressure.
Sales volume up ~12% QoQ, realisation up ~10% QoQ
Ambuja Cement reported sales volumes of 5.66 MT that increased
by ~7% YoY and ~12% QoQ. Net realisation increased by ~3%YoY
and ~10% QoQ to | 3899 per tonne mainly due to an increase in
prices across all regions during the quarter.
EBITDA per tonne improves 73% QoQ
Sequentially, the EBITDA per tonne has improved significantly by
~73% to | 1081 on account of ~10% increase in realisations
coupled with ~4% decline in total cost. The decline in total cost was
mainly due to savings in power & fuel cost, raw material cost and
others cost. Thus, the EBITDA margin has improved by 1012 bps
QoQ to 27.7%. On a YoY basis, the EBITDA per tonne declined by
~8% on account of higher costs.
Valuation
At the CMP of | 150, the stock is trading at 20.1x and 17.5x its CY11E and
CY12E earnings, respectively. The stock is trading at an EV/EBITDA of
10.7x and 8.9x CY11E and CY12E EBITDA, respectively. On an EV/tonne
basis, the stock is trading at $169 and $154 its CY11E and CY12E
capacities, respectively. We are assigning a HOLD rating to the stock with
a revised target price of | 139 per share on the basis of valuation of $140
per tonne at CY12E capacity of 27 MTPA.
Net sales increase on better volume and realisations
During the quarter, net sales increased by 11% YoY (23% QoQ) to |
2207.1 crore on account of an increase in sales volume by ~7% YoY
(~12% QoQ) to 5.66 MT and improvement in realisation by ~12% YoY
(~10% QoQ) to | 3899 per tonne. The volume growth was supported by
capacity additions by the company coupled with a pick-up in demand and
increase in utilisation rate during the quarter.
EBITDA margin improves 1012 bps QoQ on realisation improvement with cost savings
The raw material cost reported a significant decline of ~27% YoY (~13%
QoQ) to | 255 per tonne on account of a significant decline in clinker
purchases by the company. The power & fuel cost increased ~26% YoY
to | 851 per tonne on account of an increase in coal and petcoke prices.
However, the cost has declined by ~4% QoQ on account of an increase
in efficiency of captive power plants. The freight cost, on the other hand,
surged ~15% YoY (11% QoQ) to | 899 on increase in fright rates. The
other expenditure increased ~23% YoY to | 676 per tonne on account of
an increase in repair & maintenance costs while it declined by ~10%
QoQ. The employee expenses increased ~14% YoY (~9% QoQ) to | 167
per tonne.
Hence, the total cost increased by ~9% YoY | 2819 per tonne while it
reported a decline of ~4% on a sequential basis. The EBITDA per tonne
declined 8.5% YoY but improved significantly by ~73% QoQ to | 1081
per tonne.
Sequentially, the EBITDA margin has improved by 1012 bps to 27.7% in
Q1CY11 as against 17.6% in Q4CY10. However, the margin has declined
by 358 bps YoY on account of higher cost.
Sequentially, net profit surges on significant improvement in operating margin
On a YoY basis, the net profit has declined by ~9% to | 407.5 crore on
account of a decline in operating margin, increase in depreciation cost by
~38% and increase in interest cost by ~28%. However, on a sequential
basis, the net profit jumped by ~62% on the back of a significant
improvement in operating margin by 1012 bps and ~33% QoQ decline in
interest cost.
Capex plan
Ambuja has increased its capacity to 27 MTPA after the commissioning of
two 1.5 MTPA grinding units at Dadri (Uttar Pradesh) and Nalagarh
(Himachal Pradesh) and 2 MTPA cement grinding units at Bhatapara
(Chhattisgarh) and Maratha (Maharashtra). During Q1CY10, the company
commissioned two clinker units of 2.2 MTPA each at Bhatapara and Rauri.
In October 2010, the company has signed an agreement with the
Rajasthan State Industrial Development and Investment Corporation, to
set up a 2.2 MTPA clinkerisation unit in Nagpur district. Pre project
planning is at an advanced stage and construction is expected to start by
Q3CY11.
Valuations
We expect volume growth of 8% CAGR over CY10-12E. Realisations are
expected to increase by 5% YoY each in CY11E and CY12E. However, an
increase in coal cost and freight cost would keep margins under pressure.
We estimate EBITDA per tonne of | 857 in CY11E and | 914 in CY12E
against | 912 in CY10.
At the CMP of | 150, the stock is trading at 20.1x and 17.5x its CY11E and
CY12E earnings, respectively. The stock is trading at an EV/EBITDA of
10.7x and 8.9x CY11E and CY12E EBITDA, respectively. On an EV/tonne
basis, the stock is trading at $169 and $154 its CY11E and CY12E
capacities, respectively. We are assigning a HOLD rating to the stock with
a revised target price of | 139 per share on the basis of valuation of $140
per tonne at CY12E capacity of 27 MTPA.
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