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
|(Rs mn)||Q3 CY12||Q3 CY11||% yoy||Q2 CY12||% qoq|
|Power and fuel costs||5,623||4,950||13.6||5,991||(6.1)|
|OPM (%)||24.0||17.4||657 bps||28.5||(451 bps)|
|Effective tax rate (%)||33.6||32.7||30.4|
|Adj. PAT margin (%)||14.0||9.4||462 bps||18.2||(421 bps)|
|Ann. EPS (Rs)||7.9||4.5||77.3||12.2||(35.2)|
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.
|Y/e 31 Mar (Rs m)||CY11||CY12E||CY13E||CY14E|
|Yoy growth (%)||14.2||19.5||13.7||17.5|
|Yoy growth (%)||(3.4)||50.3||27.2||18.9|
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