We maintain our ADD rating on Ambuja Cements (ACEM), with a revised TP of INR 380/share (SOTP based). ACEM reported profit beat in Q1CY22 on strong fixed cost controls and benefitting from its low-cost fuel inventory. Unitary EBITDA rebound ~33% QoQ to INR 1,055/MT. It continues to lower its clinker factor and is also steadily increasing its TSR and WHRS capacity. ACEM noted that its recently announced expansions in east are on track.
- Q1CY22 performance: ACEM reported ~15% EBITDA beat vs ours and consensus estimates. Ramp-up from recently commissioned plant in Rajasthan drove up volumes by 4/5% YoY/QoQ. NSR rose a modest 0.5% QoQ (up 5% YoY). Usage of low-cost inventory (at start of Q1) kept input cost flat QoQ. ACEM reduced its employee and other expenses QoQ, which pulled down unitary Opex by 5% QoQ, driving up unitary EBITDA by 33% to INR 1,055/MT. However, unitary EBITDA fell 22% YoY on sharp fuel inflation despite fixed cost controls.
- ESG and Capex updates: ACEM reduced its specific CO2 emissions by 2% YoY to 509kg/MT of cement, benefitting from ~1pp YoY reduction in clinker factor (to 62%) and ~2pp YoY increase in its TSR (to 7%). It also noted that its 7/1.5mn MT cement expansions (Capex ~INR 38bn) across east/north regions are on track which will increase its capacity to 40mn MT (no timeline mentioned). ACEM is adding ~80MW WHRS across its five plants to reduce its energy cost. We have marginally increased our EBITDA estimates for CY22/23/24E by 3/4/2% respectively, factoring in healthy cost controls. However, we expect CY22E unitary EBITDA to fall by ~INR 190/MT owing to sharp fuel price hike. We maintain our ADD rating on the stock with a revised TP of INR 380/sh (SOTP based). We value the standalone cement business at 14x its Mar-24E EBITDA and its 50% holding in ACC at a 30% discount to our target market cap for ACC.
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.