Ambuja Cement - Q2CY2020 Result Update - ICICI Securities

Ambuja Cements recorded a strong operating performance (standalone) with EBITDA margin expansion of 389 bps YoY to 27.3%. In spite of complete lockdown in April, volume decline of 28% YoY was more than offset by lower costs, which fell 30.6% YoY. Revenues for the quarter were at Rs. 2177 crore (vs. I-direct estimate of Rs. 2091 crore). Sales volumes declined 28% YoY to 4.19 MT (vs. I-direct estimate of 4.08 MT), realisations improved sharply by 6.0% QoQ to Rs. 5195/t (vs. I-direct estimate of Rs. 5,121/t) mainly due to a firm pricing environment. EBITDA margins expanded 389 bps YoY to 27.3% (far ahead of I-direct estimate of 18.9%). EBITDA expansion was driven by better realisations, enhanced focus on supply chain management, contract negotiations and fuel efficiencies that helped addressing the impact of lower volumes. Other income was also up 231% YoY to Rs. 192 crore as it included dividend income of Rs. 132 crore from ACC that led to net profit growth of 10% YoY to Rs. 453 crore (vs. I-direct estimate: Rs. 217 crore).

Valuation & Outlook

Although the company has managed to offset the lower business through cost control, it would continue to remain a laggard in terms of gaining market share and growth in the long run. After the recent run-up in the stock price, we now downgrade the stock to HOLD with a revised target price of Rs. 211 (implying a consolidated EV/t of $110, 9.5x CY21E EV/EBITDA).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Ambuja_Q2CY20.pdf

Shares of AMBUJA CEMENTS LTD. was last trading in BSE at Rs.206.95 as compared to the previous close of Rs. 201. The total number of shares traded during the day was 644084 in over 8662 trades.

The stock hit an intraday high of Rs. 208.8 and intraday low of 202.05. The net turnover during the day was Rs. 132711925.

Source : Equity Bulls

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