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UBS Investment Research
Ambuja Cements Limited
Higher profitability, but priced in
[ EXTRACT]
Commissions 2mt capacity at Maratha and Bhatapara
Ambuja Cements (Ambuja) commissioned a 0.9mt plant at Maratha in Q211 and a
1.1mt plant at Bhatapara in July 2011. With this, total grinding capacity stands at
27mtpa and clinker capacity at 16.9mtpa. Ambuja is self-sufficient in clinker and
did not procure any clinker in Q211. The company expects demand to remain
muted this year with 5-6% YoY growth, which could increase to 8-9% next year.
Post that, it thinks the industry could return to double-digit demand growth.
Ambuja expects operating margins in the second half of the year to be lower than
the first half.
Wants to maintain market share
Ambuja is planning a 2.2mt clinkerisation unit in Rajasthan, which is currently at
the planning stage. It highlighted that it would like to maintain its market share and
frame capacity addition plans accordingly. It thinks small cement plants will be
loss-making and valuations are likely to come closer to replacement cost. Large
cement companies would then be interested in making acquisitions, according to
the company.
Revise earnings estimates
We revise our 2011/2012/2013 EPS estimates from Rs8.30/Rs10.13/Rs11.79 to
Rs8.63/Rs9.88/Rs12.31, led primarily by the revision in our price and volume
estimates following the Q211 results.
Valuation: Sell rating with price target of Rs125
We lower our price target from Rs130 to Rs125, as we now value Ambuja on an
EV/EBITDA multiple of 6x (FY13E) (previously 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, it
is one of the most efficient cement producers in the country.
Statement of Risk
We believe the key risk to our outlook for the sector could come from an
unexpected fall in cement prices, increase in input costs, such as coal/freight,
and any government intervention to lower cement prices.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Ambuja Cements Limited
Higher profitability, but priced in
[ EXTRACT]
Commissions 2mt capacity at Maratha and Bhatapara
Ambuja Cements (Ambuja) commissioned a 0.9mt plant at Maratha in Q211 and a
1.1mt plant at Bhatapara in July 2011. With this, total grinding capacity stands at
27mtpa and clinker capacity at 16.9mtpa. Ambuja is self-sufficient in clinker and
did not procure any clinker in Q211. The company expects demand to remain
muted this year with 5-6% YoY growth, which could increase to 8-9% next year.
Post that, it thinks the industry could return to double-digit demand growth.
Ambuja expects operating margins in the second half of the year to be lower than
the first half.
Wants to maintain market share
Ambuja is planning a 2.2mt clinkerisation unit in Rajasthan, which is currently at
the planning stage. It highlighted that it would like to maintain its market share and
frame capacity addition plans accordingly. It thinks small cement plants will be
loss-making and valuations are likely to come closer to replacement cost. Large
cement companies would then be interested in making acquisitions, according to
the company.
Revise earnings estimates
We revise our 2011/2012/2013 EPS estimates from Rs8.30/Rs10.13/Rs11.79 to
Rs8.63/Rs9.88/Rs12.31, led primarily by the revision in our price and volume
estimates following the Q211 results.
Valuation: Sell rating with price target of Rs125
We lower our price target from Rs130 to Rs125, as we now value Ambuja on an
EV/EBITDA multiple of 6x (FY13E) (previously 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, it
is one of the most efficient cement producers in the country.
Statement of Risk
We believe the key risk to our outlook for the sector could come from an
unexpected fall in cement prices, increase in input costs, such as coal/freight,
and any government intervention to lower cement prices.
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