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UBS Investment Research
Ambuja Cements Limited
P AT largely in-line, realizations surprise
Event: 2QCY11 Results largely in-line with UBS-e and consensus estimates
Ambuja reported Q2CY11 net sales of Rs21.7bn (+6% y/y, -2% q/q), operating
profit of Rs5.8bn (-3% y/y, -5% q/q; ahead of UBS-e Rs5.6bn and consensus
estimate of Rs5.5bn) and PAT of Rs3.5bn (-11% y/y, +4% q/q; UBS-e/consensus
estimate of Rs3.3/3.4bn). Q2CY11 cement volumes declined by 3% y/y (-8% q/q)
to 5.2mt. Domestic cement sales declined by 2.4% y/y and cement exports fell by
35% y/y in Q2CY11. Clinker sales during the quarter were 0.13mt compared
to .07mt a year ago.
Impact: Cement realizations were higher than expectations
Cement realizations increased by about 7% QoQ, which is the key positive surprise
in the result (Ultratech realizations had also improved by about 6.5% QoQ). There
has been a sharp increase of 26% QoQ (26% YoY as well) in staff costs per ton.
Operating cost per ton increased by about 8% QoQ led by the increase in staff
costs as well as 27% increase in power & fuel costs (higher coal costs and power
tariffs). Other expenditure per ton also increased by about 12% QoQ.
Action: Seasonal weakness likely to impact profitability
While Q1 is a strong quarter for cement companies, Q2 is the weakest quarter due
to low construction activity in the monsoon period (volumes and prices remain
under pressure).
Valuation: Sell rating with PT of Rs130
We value Ambuja at an EV/EBITDA multiple of 6.5x.
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
P AT largely in-line, realizations surprise
Event: 2QCY11 Results largely in-line with UBS-e and consensus estimates
Ambuja reported Q2CY11 net sales of Rs21.7bn (+6% y/y, -2% q/q), operating
profit of Rs5.8bn (-3% y/y, -5% q/q; ahead of UBS-e Rs5.6bn and consensus
estimate of Rs5.5bn) and PAT of Rs3.5bn (-11% y/y, +4% q/q; UBS-e/consensus
estimate of Rs3.3/3.4bn). Q2CY11 cement volumes declined by 3% y/y (-8% q/q)
to 5.2mt. Domestic cement sales declined by 2.4% y/y and cement exports fell by
35% y/y in Q2CY11. Clinker sales during the quarter were 0.13mt compared
to .07mt a year ago.
Impact: Cement realizations were higher than expectations
Cement realizations increased by about 7% QoQ, which is the key positive surprise
in the result (Ultratech realizations had also improved by about 6.5% QoQ). There
has been a sharp increase of 26% QoQ (26% YoY as well) in staff costs per ton.
Operating cost per ton increased by about 8% QoQ led by the increase in staff
costs as well as 27% increase in power & fuel costs (higher coal costs and power
tariffs). Other expenditure per ton also increased by about 12% QoQ.
Action: Seasonal weakness likely to impact profitability
While Q1 is a strong quarter for cement companies, Q2 is the weakest quarter due
to low construction activity in the monsoon period (volumes and prices remain
under pressure).
Valuation: Sell rating with PT of Rs130
We value Ambuja at an EV/EBITDA multiple of 6.5x.
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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