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| India Infoline Research Team / 10:50 , Apr 20, 2012 |
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CMP Rs165, Target Rs151, Downside 8.4%
- Revenues grew by 8.4% yoy to Rs26.6bn; meet estimates
- Margins expanded by 80bps, above our expectation, primarily due to lower-than expected RM and other overheads cost.
- One time depreciation policy adjustment drags PAT lower.
- Revise our earnings estimates higher; Upgrade to Market Performer
Result table
| (Rs m) |
Q1 CY12 |
Q1 CY11 |
% yoy |
Q4 CY11 |
% qoq |
| Net sales |
26,609 |
22,225 |
19.7 |
23,577 |
12.9 |
| Material costs |
1,654 |
1,283 |
28.9 |
3,357 |
(50.7) |
| Personnel costs |
1,030 |
946 |
8.9 |
1,255 |
(17.9) |
| Power and fuel costs |
6,269 |
4,816 |
30.2 |
4,714 |
33.0 |
| Freight cost |
6,017 |
5,086 |
18.3 |
5,074 |
18.6 |
| Other overheads |
3,919 |
3,823 |
2.5 |
4,681 |
(16.3) |
| Operating profit |
7,721 |
6,270 |
23.1 |
4,496 |
71.7 |
| OPM (%) |
29.0 |
28.2 |
80 bps |
19.1 |
994 bps |
| Depreciation |
(1,209) |
(1,061) |
13.9 |
(1,238) |
(2.4) |
| Interest |
(168) |
(138) |
21.8 |
(99) |
70.4 |
| Other income |
871 |
521 |
67.2 |
651 |
33.8 |
| PBT |
7,214 |
5,592 |
29.0 |
3,811 |
89.3 |
| Tax |
(1,301) |
(1,517) |
(14.2) |
(544) |
139.1 |
| Effective tax rate (%) |
18.0 |
27.1 |
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14.3 |
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| Adjusted PAT |
5,913 |
4,075 |
45.1 |
3,266 |
81.0 |
| Adj. PAT margin (%) |
22.2 |
18.3 |
389 bps |
13.9 |
837 bps |
| Extra ordinary items |
(2,791) |
- |
- |
(243) |
1,051.1 |
| Reported PAT |
3,122 |
4,075 |
(23.4) |
3,024 |
3.2 | Source: Company, India Infoline Research
Higher realization translate into 20% revenue growth
Ambuja Cements (ACL) reported revenue growth of ~20%yoy to Rs26.6bn, in-line with our estimate. Realisation improved by 2.7%qoq and 10%yoy (in-line with our expectation) largely due to strong demand in eastern and northern region (40% of ACL market share). Net realisation for the quarter stood at Rs4,320/ton. The volume growth of 8% was in-line with our estimates.
Lower RM and other overheads cost translate into margin expansion
OPM for ACL expanded by 80bps yoy to 29%, above our estimate of 25%. Higher than expected operating performance was on account of:-
A) Raw material cost stood at Rs271/ton against our expectation of Rs320/ton, we believe adjustment in inventory done in Q4 CY11 could be one of the reasons for lower RM cost. B) Drop in other overhead cost (Rs643/ton against Rs845/ton previous quarter) also boosted operational performance.
Cost Analysis
|
Q1 CY12 |
Q1 CY11 |
% yoy |
Q4 CY11 |
% qoq |
| Material costs |
6.2 |
5.8 |
44 |
14.2 |
(802) |
| Personnel costs |
3.9 |
4.3 |
(39) |
5.3 |
(145) |
| Power and fuel costs |
23.6 |
21.7 |
189 |
20.0 |
356 |
| Freight cost |
22.6 |
22.9 |
(27) |
21.5 |
109 |
| Other overheads |
14.7 |
17.2 |
(248) |
19.9 |
(513) |
| Total costs |
71.0 |
71.8 |
(80) |
80.9 |
(994) | Source: Company, India Infoline Research
Depreciation adjustment translates into lower PAT
Reported PAT for ACL stood at Rs3.1bn on back of changes in depreciation policy pertaining to fixed asset of captive power plant. PAT was further impacted by higher interest cost.
Upgrade to market performer
In light of higher average realizations in the eastern-northern region, we believe realisation for ACL will remain buoyant in the near-term. This coupled with stagnant international coal price could translate into margin expansion going forward. Further, the stock has corrected by 10% from February peak thus limiting the scope for further material downside.
We thereby, upgrade ACL to Market Performer from SELL with 9-months target price of 151.
Financial summary
| Y/e 31 Mar (Rs m) |
CY10 |
CY11 |
CY12E |
CY13E |
| Revenues |
75,289 |
85,974 |
101,801 |
105,974 |
| yoy growth (%) |
4.6 |
14.2 |
18.4 |
4.1 |
| Operating profit |
19,510 |
19,890 |
25,638 |
29,656 |
| OPM (%) |
25.9 |
23.1 |
25.2 |
28.0 |
| Pre-exceptional PAT |
12,371 |
12,475 |
17,010 |
19,635 |
| Reported PAT |
12,636 |
12,232 |
17,010 |
19,635 |
| yoy growth (%) |
3.7 |
(3.2) |
39.1 |
15.4 |
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| EPS (Rs) |
8.0 |
7.4 |
10.0 |
11.6 |
| P/E (x) |
20.5 |
22.4 |
16.4 |
14.2 |
| Price/Book (x) |
3.5 |
3.5 |
3.0 |
2.5 |
| EV/EBITDA (x) |
12.1 |
13.0 |
9.8 |
8.0 |
| Debt/Equity (x) |
0.0 |
0.0 |
0.0 |
0.0 |
| RoE (%) |
17.9 |
16.2 |
19.6 |
19.1 |
| RoCE (%) |
22.4 |
21.3 |
26.0 |
25.6 | Source: Company, India Infoline Research
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