Mr. Kamlesh Bagmar - Deputy Head of Research at Prabhudas Lilladher.
Quick Pointers:
- Beat in margins due to lower other expenses
- High clinker sales led the volume growth
- Approved 27.5MW of new Waste heat recovery at Maharashtra and Gujarat plants. The capacity would increase to 87MW from current 6.5MW by CY23e.
Ambuja Cement (ACEM) started the new calendar year with better than expected earnings. EBITDA fell 19% YoY to Rs7.9bn, above our/consensus estimates (CE) by 10%/16%. Higher clinker sales volume and lower other expenses drove the beat. While, we maintain our estimates as elevated other expenses in H2, a usual trend, would keep margins under check.
ACEM delivered material turnaround in earnings over last couple of years. The major contributors to this turnaround were multifold increase in volumes under MSA, optimisation of fixed costs and reduction in specific energy consumption. On the incremental basis, we don't see meaningful scope for further cost reduction. Theme of capacity expansion would get delayed due to likely exit of parent. As the valuations have surged to rich territory with EV/EBITDA of 14x and EV/t of USD170/t, we downgrade rating on stock to Hold with TP of Rs400 with EV/EBITDA of 14.5x CY23e.
Volume growth boosted by clinker sales: Led by 3.5x YoY/1x QoQ increase in clinker sales volume to 0.32mt, ACEM's overall sales volumes grew 3.5% YoY to 7.5mnt (PLe:7.2mnt). Cement sales volumes remained flat YoY, in line with our estimates.
Miss on realisations due to high share of clinker volumes: Realisations increased marginally by 0.2% QoQ/4% QoQ to Rs5,147 (PLe:Rs5,204) as higher sale of clinker negated the increase in cement realisations.
Lower other expenses aided the margins: Cost increased 14.6% YoY/Rs530/t at Rs4,185/t (PLe: Rs4,285) due to 36% YoY increase in power & fuel cost, offset by 5% YoY reduction in freight cost. The beat on our estimates was primarily due to marginal increase of 3% YoY in other expenses (Rs737 v/s PLe:Rs830) in spite of steep increase in packaging, stores& spares and repairs costs. This restricted fall in EBITDA/t to 22% at Rs1,055 (PLe: Rs1,000). Aided by lower than expected depreciation and tax rate (down 70bps YoY at 24.3% v/s PLe:25.2%), PAT came above our estimates by 19% at Rs4.95bn (PLe: Rs4.16bn, CE:Rs4.05bn), down 25% YoY.
Shares of Ambuja Cements Limited was last trading in BSE at Rs. 371.85 as compared to the previous close of Rs. 383.55. The total number of shares traded during the day was 348944 in over 8523 trades.
The stock hit an intraday high of Rs. 385.60 and intraday low of 370.55. The net turnover during the day was Rs. 132041246.00. |
