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Ambuja Cements Ltd.
C2Q11: EBITDA Beat;
Higher Tax Results in Lower
PAT
Impact on our views: Ambuja Cement (ACEM)
reported PAT at Rs3.5bn, below our and consensus
estimates on the back of higher-than-expected taxes.
EBITDA at Rs5.9bn was marginally ahead of our
estimate, supported by better-than-expected realization.
Cement prices have softened in the current quarter and,
in our view, prices and volumes will remain benign in the
near term and result in muted near-term earnings
progression. We retain our EW rating on the stock.
What's new: ACEM reported QE Jun-11 PAT below our
and consensus’ expectation. Core revenue grew 6%
YoY but declined 1% sequentially to Rs21.8bn. This was
driven primarily by 9% YoY and 5% QoQ improvement
in per ton realization. Volume trends were muted, having
declined 2% YoY and 6% QoQ. Realization gains were
offset by 10% YoY (per ton) increase in costs, however.
As a result, EBITDA margin declined 300bp YoY and
80bp QoQ to 26.9% (ahead of MSe of 26.7%) and
EBITDA declined by 5% YoY and 4% QoQ to Rs5.9bn,
but was higher relative to our estimate of Rs5.6bn. PAT
decline was higher than EBITDA at 11% YoY and 15%
QoQ to Rs3.5bn, given higher taxes. This will partly
reverse in quarters ahead, in our view.
Volume progression was muted; marginally below
industry growth: ACEM reported volumes at 5.29mnt,
including exports and clinker sales, implying 2% YoY
decline. While volume progression was muted for the
industry, ACEM’s volume trends were weaker on a
relative basis. We expect some recovery in ACEM’s
volumes from current levels and believe that it can grow
ahead of the industry.
Higher-than-expected realization drives margins
and earnings progression…: ACEM reported 9% YoY
and 5% QoQ improvement in realizations for QE Jun-11.
Like its peers, the gains were driven largely by higher
prices in the month of April and May, followed by some
correction in June. Realizations will remain muted in the next
few months partly on seasonality and its impact on demand,
post which we expect some recovery.
…Partly offset by higher-than-expected costs: ACEM’s per
ton costs increased 13% YoY primarily on higher power & fuel
and freight costs. Increase in fuel cost was driven by higher
international and domestic coal prices. In our view, it was also
driven by higher clinker production (but lower conversion to
cement) during the quarter. Given that international coal prices
have been stable in last few months, we do not expect further
significant impact for ACEM. ACEM’s per ton freight cost
increased by 14% YoY and 4% QoQ, however, the risk of
further hike in freight cost remains given recent diesel price
hike.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ambuja Cements Ltd.
C2Q11: EBITDA Beat;
Higher Tax Results in Lower
PAT
Impact on our views: Ambuja Cement (ACEM)
reported PAT at Rs3.5bn, below our and consensus
estimates on the back of higher-than-expected taxes.
EBITDA at Rs5.9bn was marginally ahead of our
estimate, supported by better-than-expected realization.
Cement prices have softened in the current quarter and,
in our view, prices and volumes will remain benign in the
near term and result in muted near-term earnings
progression. We retain our EW rating on the stock.
What's new: ACEM reported QE Jun-11 PAT below our
and consensus’ expectation. Core revenue grew 6%
YoY but declined 1% sequentially to Rs21.8bn. This was
driven primarily by 9% YoY and 5% QoQ improvement
in per ton realization. Volume trends were muted, having
declined 2% YoY and 6% QoQ. Realization gains were
offset by 10% YoY (per ton) increase in costs, however.
As a result, EBITDA margin declined 300bp YoY and
80bp QoQ to 26.9% (ahead of MSe of 26.7%) and
EBITDA declined by 5% YoY and 4% QoQ to Rs5.9bn,
but was higher relative to our estimate of Rs5.6bn. PAT
decline was higher than EBITDA at 11% YoY and 15%
QoQ to Rs3.5bn, given higher taxes. This will partly
reverse in quarters ahead, in our view.
Volume progression was muted; marginally below
industry growth: ACEM reported volumes at 5.29mnt,
including exports and clinker sales, implying 2% YoY
decline. While volume progression was muted for the
industry, ACEM’s volume trends were weaker on a
relative basis. We expect some recovery in ACEM’s
volumes from current levels and believe that it can grow
ahead of the industry.
Higher-than-expected realization drives margins
and earnings progression…: ACEM reported 9% YoY
and 5% QoQ improvement in realizations for QE Jun-11.
Like its peers, the gains were driven largely by higher
prices in the month of April and May, followed by some
correction in June. Realizations will remain muted in the next
few months partly on seasonality and its impact on demand,
post which we expect some recovery.
…Partly offset by higher-than-expected costs: ACEM’s per
ton costs increased 13% YoY primarily on higher power & fuel
and freight costs. Increase in fuel cost was driven by higher
international and domestic coal prices. In our view, it was also
driven by higher clinker production (but lower conversion to
cement) during the quarter. Given that international coal prices
have been stable in last few months, we do not expect further
significant impact for ACEM. ACEM’s per ton freight cost
increased by 14% YoY and 4% QoQ, however, the risk of
further hike in freight cost remains given recent diesel price
hike.
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