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For 3QCY2011, Ambuja Cements (Ambuja) reported 12.7% growth in its bottom
line, which was lower than ours and consensus estimates. Lower-than-expected
performance was on account of lower realization and higher input costs. The
company’s realization, though higher by 7.3% yoy, fell by 5.8% on a sequential
basis. Further, the company faced substantial margin pressure due to higher
input costs, which negated the improvement in realization, resulting in a
167bp decline in OPM to 17.4%. We maintain our Neutral view on the stock.
OPM at 17.4%, down 167bp yoy: During 3QCY2011, Ambuja’s net sales
increased by 15.4% yoy to `1,805cr due to higher realization and growth in
dispatches. Realization for the quarter improved by 7.3% yoy to
`3,849/tonne, while dispatches grew by 7.6% yoy to 4.69mn tonnes.
However, margins were under pressure because higher raw-material, power
and fuel and freight costs, which negated the increase in realization. OPM for
the quarter stood at 17.4%, down by 167bp on a yoy basis. However, the
bottom line was boosted by sale of surplus power amounting to `4.1cr (vs.
`0.4cr in 3QCY2010) included in other operating income.
Outlook and valuation: We expect Ambuja to register a 13.4% CAGR in its top
line over CY2010-12, aided by capacity addition. However, the bottom line is
expected to grow at a lower CAGR of 5.6% over the mentioned period due to
higher operating costs. At current levels, the stock is trading at fair valuations of
8.9x EV/EBITDA and EV/tonne of US$168 on CY2012 estimates. We maintain
our Neutral view on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For 3QCY2011, Ambuja Cements (Ambuja) reported 12.7% growth in its bottom
line, which was lower than ours and consensus estimates. Lower-than-expected
performance was on account of lower realization and higher input costs. The
company’s realization, though higher by 7.3% yoy, fell by 5.8% on a sequential
basis. Further, the company faced substantial margin pressure due to higher
input costs, which negated the improvement in realization, resulting in a
167bp decline in OPM to 17.4%. We maintain our Neutral view on the stock.
OPM at 17.4%, down 167bp yoy: During 3QCY2011, Ambuja’s net sales
increased by 15.4% yoy to `1,805cr due to higher realization and growth in
dispatches. Realization for the quarter improved by 7.3% yoy to
`3,849/tonne, while dispatches grew by 7.6% yoy to 4.69mn tonnes.
However, margins were under pressure because higher raw-material, power
and fuel and freight costs, which negated the increase in realization. OPM for
the quarter stood at 17.4%, down by 167bp on a yoy basis. However, the
bottom line was boosted by sale of surplus power amounting to `4.1cr (vs.
`0.4cr in 3QCY2010) included in other operating income.
Outlook and valuation: We expect Ambuja to register a 13.4% CAGR in its top
line over CY2010-12, aided by capacity addition. However, the bottom line is
expected to grow at a lower CAGR of 5.6% over the mentioned period due to
higher operating costs. At current levels, the stock is trading at fair valuations of
8.9x EV/EBITDA and EV/tonne of US$168 on CY2012 estimates. We maintain
our Neutral view on the stock.
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