Ambuja Cements' results were better than our estimates on all parameters backed by healthy sales volumes and firm realisations. Sales volume grew 7.2% YoY to 7.01 MT (vs. I-direct estimate: 6.8MT), realisations were also up 4.6% YoY to Rs. 5014/t (flat QoQ) vs. I-direct estimate of Rs. 4,915/t leading to revenue growth of 12.1% YoY. Firm realisations, lower cost of production (down 1% YoY to Rs. 3919/t) contributed 439 bps YoY margin expansion. Re-negotiation of contracts, improvement in logistic efficiencies aided by master supply agreement and fixed cost optimisation led to reduction in costs. Absolute EBITDA increased 40.3% YoY to Rs. 768 crore (vs I-direct estimate: Rs. 686 crore). EBITDA/t came in at Rs. 1095/t (up 30.9% YoY) vs. I-direct estimate: Rs. 1004/t. However, reversal of deferred tax liability of Rs. 103 crore on account of adoption of new tax rate led to PAT growth of 9.3% YoY to Rs. 497 crore. The greenfield project at Marwar Mundwa, Rajasthan (1.8 MT GU, 3 MT clinker) is expected to be commissioned by Q2CY21E. This would help improve its lost market share in north and west regions. The company is also setting up WHRS at Darlaghat, Bhatapara and Marwar Mundwa to bring down power costs and has set a target to increase the green power share to over 38% from current 5% over the next two to three years.
Valuation & Outlook
Although the company is addressing capacity constraint issues, the same is not enough to expand the market share in light of capex announced by other major companies with macro environment turning favourable. Hence, we maintain HOLD rating with a revised target price of Rs. 305 (implying a consolidated EV/t of $162, 12.5x CY22E EV/EBITDA, earlier TP Rs. 280).
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_AmbujaCement_Q4CY20.pdf
Shares of AMBUJA CEMENTS LTD. was last trading in BSE at Rs.266.65 as compared to the previous close of Rs. 275.25. The total number of shares traded during the day was 219492 in over 2580 trades.
The stock hit an intraday high of Rs. 277 and intraday low of 265.35. The net turnover during the day was Rs. 59279941.