Ambuja Cement Ltd (Q1 CY13)

India Infoline News Service | Mumbai |

Ambuja Cement (ACL) topline de-grow by 4% to Rs25.5bn. Stalled rural housing schemes and weak demand in northern and eastern regions translated into 4% yoy volume de-growth. Slackening demand did impact realisation, which remained flat yoy but decrease by ~4%qoq.

Volume de-growth coupled with flat realisation translate into a 4% yoy drop in revenues
Average realization flat yoy but down 4% qoq as pricing pressure emerges in northern and eastern regions
OPM contracts by 720bps, below estimate due to increase in RM cost
PAT de-grew by 17% yoy; lower tax outgo  and higher other income arrest further slide
Maintain Market Performer with a 9-12 month price target of Rs192

Result table*
(Rs mn) Q1 CY13 Q1 CY12 % yoy Q4 CY12 % qoq
Net sales 25,570 26,506 (3.5) 23,352 9.5
Material costs 2,442 1,654 47.6 1,433 70.4
Personnel costs 1,208 1,030 17.2 1,367 (11.6)
Power and fuel costs 5,495 6,254 (12.1) 5,473 0.4
Freight cost 6,449 6,027 7.0 5,816 10.9
Other overheads 4,446 3,880 14.6 4,764 (6.7)
Operating profit 5,532 7,661 (27.8) 4,501 22.9
OPM (%) 21.6 28.9 (727 bps) 19.3 236 bps
Depreciation (1,204) (1,209) (0.4) (1,855) (35.1)
Interest (132) (168) (21.2) (243) (45.4)
Other income 1,495 930 60.8 881 69.7
PBT 5,690 7,214 (21.1) 3,284 73.3
Tax (811) (1,301) (37.7) (1,164) (30.3)
Effective tax rate (%) 14.3 18.0
35.5
Adjusted PAT 4,879 5,912 (17.5) 2,120 130.2
Extra ordinary items - (2,791) - - -
Reported PAT 4,879 3,121 56.3 2,120 130.2
Source: Company, India Infoline Research,*Standalone

Volume de-growth translates into lower top-line
Ambuja Cement (ACL) topline de-grow by 4% to Rs25.5bn. Stalled rural housing schemes and weak demand in northern and eastern regions translated into 4% yoy volume de-growth. Slackening demand did impact realisation, which remained flat yoy but decrease by ~4%qoq.

OPM contracts by 720bps driven by higher raw material Cost
OPM contracts by 720bps yoy as against our estimate of -550bps. The operating performance was lower than our estimate primarily due to a rise in raw material cost which stood at Rs421/ton (as against Rs283/ton in Q1 CY12). Write-back in Power and other overheads costs to the tune of Rs291mn arrested further slide on operational numbers.

PAT stood at Rs4.9bn, a drop of 17% yoy (against our expectation of 39% yoy decline). Earnings were better than our expectation due to higher other income (up 61% yoy boosted by an interest write back on income tax for preceding years) and lower tax outgo due to tax write back of Rs1.2bn.

Retain Market Performer; revival expected in H2 FY14
We expect cement prices to remain under pressure for at least one more quarter. However, we factor in a demand revival post monsoon season as five states goes into election. We project earnings CAGR of 8% over CY12-14 and believe stock trades close to its fair value at CY14 EV/ton of US$180, 8x EV/EBIDTA and 15x PE. We retain our market performer rating with a revised price target of Rs192.

Financial Summary
Y/e 31 Mar (Rs m) CY11 CY12 CY13E CY14E
Revenues 85,948 98,017 103,550 123,218
yoy growth (%) 14.2 14.0 5.6 19.0
Operating profit 19,863 24,703 23,198 30,762
OPM (%) 23.1 25.2 22.4 25.0
Pre-exceptional PAT 12,448 15,735 16,163 19,711
Reported PAT 12,206 12,944 16,163 19,711
yoy growth (%) (3.4) 6.0 24.9 21.9





EPS (Rs) 8.1 10.2 10.5 12.8
P/E (x) 23.4 18.5 18.0 14.8
Price/Book (x) 3.6 3.3 2.8 2.4
EV/EBITDA (x) 13.7 10.9 11.3 8.0
Debt/Equity (x) 0.0 0.0 0.0 0.0
RoE (%) 16.2 18.6 16.8 17.3
RoCE (%) 21.2 24.8 21.6 23.9
Source: Company, India Infoline Research
BSE 264.65 [0.20] ([0.08]%)
NSE 264.75 0.65 (0.25%)

***Note: This is a NSE Chart

 

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