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Ambuja Cements Ltd Research Report - 21st Jan 2016

Cement | Published on Oct 30th 2015


For 3QCY2015, Ambuja Cements (ACEM) reported an in line set of numbers on the operational front. The company reported a 1.7% yoy growth in cement volumes to 4.9mt (marginally below our estimate of 4.95mt). The realization/tonne declined by 5.8% yoy to Rs4,276 (below our estimate of Rs4,345). The EBITDA fell by 21.2% yoy to Rs310.1cr (in line with our estimate of Rs318.6cr). The EBITDA/tonne at Rs633, is down by 22.5% on a yoy basis (in line of our estimate of Rs643). EBIDTA margin down 317bp yoy: For 3QCY2015, ACEM’s top-line fell by 4.2% yoy to Rs2,095.2cr, impacted by weak demand and fall in realization. The company’s volume rose by 1.7% yoy (fell 16.7% qoq) to 4.9mt, while realization was down by 5.8% yoy due to pricing pressure in its key markets of North and West regions. However, the operating performance was in line with our estimates, led by operational efficiency. The company’s EBIDTA declined by 21.2% yoy to Rs310.1cr but was in line with our estimate of Rs318.9cr. The EBIDTA decline was led by weak realization and increase in other expenses (led by Rs40cr provision for DMF). Hence the EBIDTA margin, at 14.7%, declined by 317bp yoy, but was in line with our estimate. The Reported PAT fell by 35.8% yoy to Rs153.6cr (below our estimate of Rs220.2cr), mainly due to higher depreciation and lower other income. Outlook and valuation: Going forward, we expect ACEM’s volume growth to remain under pressure due to lack of capacity, for the next two years. However, we expect the top-line to register an 8.1% CAGR over CY2014-17E. At the current market price, the stock is trading at an EV/tonne of US$150 on CY2017E installed capacity and 10.6x EV/EBIDTA of CY2017E. We maintain our Accumulate rating on the stock with target price of Rs233 on 12.5x EV/EBIDTA and EV/tonne of US$165 on CY2017E installed capacity.

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CMP 207
Target Price 233
Investment Period12 Months

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Shareholding Pattern (%)

Public & Others5.0
Grand Total100.0

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