Ambuja Cements (Q2 CY12)

India Infoline News Service | Mumbai |

Ambuja Cements (ACL) reported ~18% yoy rise in revenue to Rs25.8bn, beating our estimate.

CMP Rs180, Target Rs170, Downside 5.3%

  • Revenue grew 18% yoy to Rs25.7bn, above our estimate of Rs24.9, primarily driven by improved realizations  
  • Margin expanded by 120bps yoy, in-line with estimate; RM costs come in lower than expected
  • PAT figure of Rs4.7bn misses our forecast on higher than estimated depreciation and interest expenses
  •   Retain Market Performer with 9-mth tgt of Rs170
Result table
(Rs m) Q2 CY12 Q2 CY11 % yoy Q1 CY12 % qoq
Net sales 25,785 21,895 17.8 26,609 (3.1)
Material costs 1,161 262 342.6 1,654 (29.8)
Personnel costs 1,237 1,099 12.5 1,030 20.1
Power and fuel costs 5,991 5,633 6.3 6,269 (4.4)
Freight cost 5,871 4,980 17.9 6,017 (2.4)
Other overheads 4,176 3,937 6.1 3,919 6.6
Operating profit 7,349 5,985 22.8 7,721 (4.8)
OPM (%) 28.5 27.3 117 bps 29.0 -51 bps
Depreciation (1,215) (1,074) 13.2 (1,209) 0.5
Interest (180) (152) 18.8 (168) 7.4
Other income 783 562 39.4 871 (10.1)
PBT 6,736 5,320 26.6 7,214 (6.6)
Tax (2,047) (1,845) 10.9 (1,301) 57.3
Effective tax rate (%) 30.4 34.7   18.0  
Adjusted PAT 4,689 3,475 34.9 5,913 (20.7)
Adj. PAT margin (%) 18.2 15.9 231 bps 22.2 -404 bps
Extra ordinary items - - - (2,791) -
Reported PAT 4,689 3,475 34.9 3,122 50.2
Source: Company, India Infoline Research

Higher realization drives ~18% yoy revenue growth

Ambuja Cements (ACL) reported ~18% yoy rise in revenue to Rs25.8bn, beating our estimate. Realisation grew 6.4% qoq and 11.7% yoy (above our expectation) as 1) prices remained firm due to delay in monsoon and 2) strong demand in north-eastern states (40% of ACL revenue). Net realisation for the quarter stood at Rs4,598, 3% above our estimates of Rs4,464. Volume growth of 5.5% was in-line with estimate. 


Margin at 28.5% meets estimate

OPM expanded by 120bps yoy to 28.5%, in line with our estimate of 28.3%. Higher than expected power and freight cost was cushioned by lower adjusted raw material expenses at Rs208/ton (vs estimated Rs280/ton). Lower than expected other overheads (Rs748/ton against expectation Rs810/ton) also helped boost margins.


ACL procures a high proportion of its coal from international markets and we believe the company has not realized full benefits from a sharp fall (15% qoq) in international coal prices, as it may have used higher cost inventory. 


Cost Analysis
  Q2 CY12 Q2 CY11 % yoy Q1 CY12 % qoq
Material costs 4.5 1.2 330 6.2 (171)
Personnel costs 4.8 5.0 (22) 3.9 93
Power and fuel costs 23.2 25.7 (249) 23.6 (32)
Freight cost 22.8 22.7 3 22.6 16
Other overheads 16.2 18.0 (178) 14.7 147
Total costs   71.5 72.7 (117) 71.0 51
Source: Company, India Infoline Research

PAT misses forecast; retain Market Performer  

Reported PAT at Rs4.7bn missed our estimate on higher interest and depreciation costs (due to change in policy pertaining to fixed assets of captive power plant).  


In light of higher average realizations and firm margins (due to fall in international coal prices), we have upgraded our earning estimates by 9% for CY12 and 13% for CY13. However, the stock has rallied by 10% from April trough thus limiting the scope for any further upside, in our view. Further, we expect cement demand to take a hit in case of any drought-like situation, although we have not penciled in such a scenario in our estimates. Retain our Market Performer rating with a 9-months price target of 170.


Financial summary
Y/e 31 Mar (Rs m) CY10 CY11 CY12E CY13E
Revenues 75,289 85,948 103,097 108,198
yoy growth (%) 4.6 14.2 20.0 4.9
Operating profit 19,510 19,863 27,881 33,624
OPM (%)
BSE 264.10 [0.55] ([0.21]%)
NSE 263.70 [1.05] ([0.40]%)

***Note: This is a NSE Chart

 

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