ICICI Securities, on Ambuja Cements, :Realisation fall, costs rise dent margins…

Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄


Realisation fall, costs rise dent margins…
Ambuja Cement reported net sales of Rs 1564 crore (-3% YoY and 24%
QoQ) and EBITDA of Rs 283.2 crore (34% YoY, 53% QoQ). These were
below our respective estimates of Rs 1593.3 crore and Rs 368.1 crore,
respectively. Net profit at Rs 152.1 crore was below our estimate of Rs
223.9 crore. The operating margin declined by 858 bps YoY (1135 bps
QoQ down) to 18.1% on account of a significant decline in realisation
and increase in input costs. The company has increased its capacity to
26 MTPA after commissioning of 4.4 MTPA of clinker units and 3 MTPA
of grinding units. We expect volume growth of 8% CAGR (CY09-11E).
Margins are expected to be under pressure in CY10E despite savings in
raw material costs as pricing pressure is inevitable in CY10E on the back
of a decline in capacity utilisation. We are changing our rating our rating
to Reduce from Sell with revised target price of Rs 130 per share.
􀂃 Sales volume and realisation impacted on subdued demand
Ambuja reported sales volume of 4.35 MTPA that increased by 5.7%
YoY. However, volumes declined by 18.5% on sequential basis. Net
realisations have declined by 8.1% YoY and 6.2% QoQ to Rs 3595
per tonne.
􀂃 EBITDA per tonne declines 38% YoY and 42% QoQ
The EBITDA per tonne has declined by 37.7% YoY to Rs 651 on
account of decline in realisations coupled with increase in total cost
by 2.6% YoY to Rs 2945 per tonne. The increase in total cost was
mainly due to increase in power & fuel cost and employee cost. On a
QoQ basis, the EBITDA per tonne has declined by 42.4%. Thus, the
EBITDA margin has declined by 858 bps YoY and 1135 bps QoQ to
18.1%.
Valuation
At the CMP of Rs 141, the stock is trading at 18.5x and 15x its CY10E and
CY11E earnings, respectively. The stock is trading at an EV/EBITDA of
10.8x and 8.1x CY10E and CY11E EBITDA, respectively. On EV/tonne, the
stock is trading at $164 and $156 its CY10E and CY11E capacities,
respectively. We are introducing CY12 estimates and valuing the
company at its CY12E capacity of 26 MTPA. We are changing our rating
from Sell to Reduce with revised target price of Rs 130 per share. At the
target price, the stock trades at $130 per tonne at CY12E capacity, which
is 8% premium to the current replacement cost of $120 per tonne.