Ambuja Cements (Q3 CY12) – Market Performer

India Infoline News Service | Mumbai |

Volume growth remained flat as demand remain weak due to onset of monsoon season

CMP Rs204, Target Rs220, Upside 8.3%

  • Jump in cement realization drives 19% yoy revenue growth, in-line with expectation

  • Volume growth remained flat as demand remain weak due to onset of monsoon season

  • Rise in power and fuel cost restrict margin expansion

  • PAT grew 77% yoy boosted by higher other income; meets estimate

  • Maintain Market Performer with 9-mth price target of Rs220

Result table*
(Rs mn) Q3 CY12 Q3 CY11 % yoy Q2 CY12 % qoq
Net sales 21,752 18,337 18.6 25,785 (15.6)
Material costs 462 1,442 (68.0) 1,161 (60.2)
Personnel costs 1,151 1,032 11.5 1,237 (6.9)
Power and fuel costs 5,623 4,950 13.6 5,991 (6.1)
Freight cost 5,035 4,161 21.0 5,871 (14.2)
Other overheads 4,262 3,558 19.8 4,176 2.0
Operating profit 5,219 3,194 63.4 7,349 (29.0)
OPM (%) 24.0 17.4 657 bps 28.5 (451 bps)
Depreciation (1,373) (1,079) 27.3 (1,215) 13.0
Interest (166) (138) 20.0 (180) (8.3)
Other income 894 571 56.6 783 14.2
PBT 4,575 2,548 79.5 6,736 (32.1)
Tax (1,535) (834) 84.1 (2,047) (25.0)
Effective tax rate (%) 33.6 32.7
30.4
Adjusted PAT 3,040 1,715 77.3 4,689 (35.2)
Adj. PAT margin (%) 14.0 9.4 462 bps 18.2 (421 bps)
Reported PAT 3,040 1,715 77.3 4,689 (35.2)
Ann. EPS (Rs) 7.9 4.5   77.3 12.2   (35.2)
Source: Company, India Infoline Research, *Standalone

Jump in cement realisation drives revenue

Ambuja Cements (ACL) revenues grew 18.7% yoy to Rs21.7bn; marginally above our estimate of Rs21.3bn. Realization improved higher than expected at 20% yoy and stood flat qoq (against our expectation of 2% qoq drop). Cement volumes remained flat as revival in monsoon translated into sluggish demand during August and September.


Surge in power and fuel cost restrict margin expansion

Operating margins for ACL expanded by 657bps yoy as against our estimate of 750bps improvement.  OPM was below our estimate on back of A) Surge in power and fuel cost, which stood at 1,196/ton due to rise in domestic coal prices and B) Other overheads being higher on account of maintenance cost. Adjusted for inventory, raw material costs edged lower (stood at Rs98/ton against an average of Rs240/ton over the previous two quarters).


PAT growth of 77% yoy was as per expectation and supported by other income (+57% yoy and +14% qoq). Higher depreciation and interest outgo was on account of augmentation of new capacity and change in policy pertaining to fixed asset (CPP).


Retain Market Performer; prices to firm up in next two months

We expect cement prices to increase further in the next two months on back of onset of peak construction season. A revival in sentiments has resulted in pick-up in cement demand from real estate and infrastructure segment. We expect the sharp price increase to result in strong yoy profit for ACL in 4Q CY12. We upgrade our earning estimates for CY13 by 5% to reflect the strong pricing scenario in key eastern, northern and western markets. Retain market performer with a revised price target of Rs220.


Financial Summary
Y/e 31 Mar (Rs m) CY11 CY12E CY13E CY14E
Revenues 85,948 102,730 116,846 137,318
Yoy growth (%) 14.2 19.5 13.7 17.5
Operating profit 19,863 27,556 36,754 43,592
OPM (%) 23.1 26.8 31.5 31.7
Pre-exceptional PAT 12,448 18,345 23,343 27,763
Reported PAT 12,206 18,345 23,343 27,763
Yoy growth (%) (3.4) 50.3 27.2 18.9





EPS (Rs) 7.3 10.8 13.8 16.4
P/E (x) 27.8 18.8 14.8 12.5
Price/Book (x) 4.3 3.7 3.0 2.4
EV/EBITDA (x) 16.4 11.5 8.1 6.3
Debt/Equity (x) 0.0 0.0 0.0 0.0
RoE (%) 16.2 21.1 22.2 21.3
RoCE (%) 21.2 27.9 30.2 29.2
Source: Company, India Infoline Research
BSE 264.10 [0.55] ([0.21]%)
NSE 263.70 [1.05] ([0.40]%)

***Note: This is a NSE Chart

 

Advertisements

  • Save upto Rs.2.67 lakh with Pradhan Mantri Awas Yojana ...Know more
  • Now Save Rs.3150 on your Demat Account ...Click here
  • Now get IIFL Personal Loan in just 8* hours...APPLY NOW!
  • Get the most detailed result analysis on the web - Real Fast!
  • Actionable & Award-Winning Research on 500 Listed Indian Companies.