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Ambuja Cements
Performance Highlights
Y/E Dec. (` cr) Net Sales Operating profit OPM (%) Net profit 4QCY2011 2,329 450 19.1 302 3QCY2011 1,805 319 17.4 171 % chg qoq 29.0 40.8 165bp 76.3 4QCY2010 % chg yoy 1,788 360 19.7 258 30.2 24.9 (63)bp 17.2
NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Cement 26,061 0.8 182/117 282,077 2 17,773 5,390 ABUJ.BO ACEM@IN
`170 -
For 4QCY2011, Ambuja Cements (ACEM) reported 17.2% growth in its bottom line, which was higher than our estimates. Better-than-expected performance was on account of higher volumes. The companys realization also improved by 17.5% yoy and 11.8% qoq. However, the company faced substantial margin
pressure due to higher freight expenses and other costs, which negated the improvement in realization, resulting in a marginal 63bp decline in OPM to 19.1%. We maintain our Neutral view on the stock.
OPM at 19.1%, down 63bp yoy: During 4QCY2011, ACEMs net sales increased by 30.2% yoy to `2,329cr due to higher realization and growth in dispatches. Realization for the quarter improved by 17.5% yoy to `4,197/tonne and volumes grew by 10.8% yoy to 5.55mn tonnes. However, margins were under pressure because of surge in freight expenses and other costs, which negated the strong growth in realization. OPM for the quarter stood at 19.1%, down 63bp yoy. However, reported net profit was affected by `33cr on account of an exceptional item relating to change in accounting method for stock options. Outlook and valuation: We expect ACEM to register 13.7% and 13.5% yoy growth in its top line and bottom line, respectively, in CY2012E, aided by 9.9% growth in volumes. At the CMP, the stock is trading at rich valuations of EV/tonne of US$184 on current capacity (US$182 on CY2012E capacity), which we believe factors in positives such as favorable locational presence. Hence, we continue to remain Neutral on the stock.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 50.3 13.6 27.9 8.2
3m 3.4
1yr 0.2
3yr 84.5
CY2009 7,077 14.7 1,218 3.0 27.9 8.0 21.3 4.0 20.1 24.9 3.1 196 22 11.3
CY2010 7,390 4.4 1,237 1.5 26.4 8.1 21.1 3.6 17.9 20.8 3.2 191 25 12.0
CY2011 8,515 15.2 1,253 1.3 23.4 7.4 23.0 3.6 16.3 18.6 3.0 184 27 13.0
CY2012E 9,682 13.7 1,422 13.5 24.0 8.4 20.2 3.3 16.9 20.4 2.6 182 27 11.0
V Srinivasan
022-39357800 Ext 6831 v.srinivasan@angelbroking.com Sourabh Taparia 022-39357800 Ext 6872 Sourabh.taparia@angelbroking.com
4QCY11 2,329 29 2358 336 14.4 471 20.2 125 5.4 507 21.8 468 20.1 1,908 450 19.1 10 124 65 (24) 357 54 15.3 302 13.0 2.0
3QCY11 1,805 29 1834 144 8.0 495 27.4 103 5.7 416 23.1 356 19.7 1,514 319 17.4 14 108 57 255 83 32.7 171 9.5 1.1
% chg qoq 29.0 28.6 132.8 (4.8) 21.5 21.9 31.6 26.0 40.8 165bp (28.5) 14.8 14.0 40.0 (34.7) 76.3 348bp 76.3
4QCY10 1,788 39 1827 165 9.2 446 24.9 77 4.3 408 22.8 371 20.7 1,467 360 19.7 21 109 38 268 10 3.8 258 14.4 1.7
% chg yoy 30.2 (26.5) 29.0 103.0 5.7 61.9 24.4 26.3 30.0 24.9 (63)bp (52.8) 14.0 72.2 33.0 432.0 17.2 (145)bp 17.2
CY2011 8,515 88 8,603 634 7.5 2,006 23.6 433 5.1 1,930 22.7 1,604 18.8 6,608 1,994 23.2 53 445 230 (24) 1,703 474 27.8 1,229 14.4 8.1
CY2010 7,390 127 7,518 542 7.3 1,697 23.0 344 4.7 1,610 21.8 1,374 18.6 5,567 1,951 26.0 49 387 120 27 1,662 398 24.0 1,264 17.1 8.3
% chg 15.2 (30.6) 14.4 17.0 18.2 26.1 19.9 16.8 18.7 2.2 (277)bp 8.1 15.0 91.6 2.5 19.0 (2.8) (267)bp (2.8)
(` cr)
(%)
1,000 500 0 3QCY10 4QCY10 Net Sales 1QCY11 2QCY11 3QCY11 4QCY11 407 152 258 348 171 302
20.0
15.0
Net Profit
OPM (RHS)
Performance highlights
Higher realization and volumes aid top-line growth
During 4QCY2011, Ambuja posted 30.2% yoy growth in its net sales to `2,329cr, aided by 17.5% yoy growth in realization to `4,197 per tonne and 10.8% yoy growth in cement and clinker volumes to 5.55mn tonnes. Strong realization growth was on account of yoy improvement in cement prices. Volume growth was on the back of higher capacity as the company has commissioned two cement mills at the Bhatapara plant in Chhattisgarh and Maratha cement works in Maharashtra, which had increased the companys total grinding capacity to 27.3mn tonnes.
Higher freight expenses and other costs offset improvement in realization Despite strong improvement in realization, the company faced margin pressure during the quarter on account of increased freight expenses and other costs. The companys OPM for the quarter fell by 63bp yoy to 19.1%. However, on a sequential basis, OPM was higher by 165bp. Per tonne analysis
For 4QCY2011, ACEMs realization/tonne improved strongly by 17.5% yoy and 11.8% qoq to `4,197. Raw-material cost on per tonne basis declined by 6.8% yoy and 1.2% qoq to `275. Further, power and fuel expenses/tonne declined by 4.6% yoy and 17.5% qoq to `849. However, freight cost/tonne rose by 12.2% yoy to `914 due to higher petroleum products costs and railway freight charges. Other costs also surged on per tonne basis by 14.0% yoy and 14.0% qoq to `843 on account of increased packaging cost, legal and professional charges and stores and spares, among others. Operating profit/tonne stood at `914, up 42.6% yoy.
Investment rationale
Most favorable capacity location among cement majors
ACEM has 81% of its total capacity located in states where supply is either less than demand or is in excess and can be economically sold to nearby supply-deficit states. Logically capacities in these states are expected to report relatively high utilization and margins.
CY2012E Earlier 9,519 7,304 2,330 458 37 2,018 605 1,412 Revised 9,682 7,452 2,324 472 40 2,031 609 1,422 Var. (%) 1.7 2.0 (0.2) 3.0 7.3 0.7 0.7 0.7
EV (` mn)
Oct-01
Oct-02
Oct-03
Oct-04
Oct-05
Oct-06
Oct-07
Oct-08
Oct-09
Oct-10
EV/tonne
Source: BSE, Company, Angel Research
$130
$150
$170
$190
Oct-11
Apr-01
Apr-02
Apr-03
Apr-04
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
881 1,648
Key ratios
Y/E Dec. Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value DuPont Analysis (%) EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Interest) (0.1) (0.2) 23.8 (0.1) (0.3) 45.1 (0.1) (0.4) 74.7 (0.2) (0.8) 32.1 (0.3) (1.0) 29.4 (0.2) (0.9) 46.5 1.2 32 8 95 (4) 1.1 45 11 108 (6) 1.2 41 10 113 (16) 1.0 38 7 136 (38) 0.9 39 8 141 (39) 1.0 37 10 130 (29) 35.8 46.6 30.8 24.7 38.2 22.9 24.9 47.4 20.1 20.8 35.2 17.9 18.6 27.0 16.3 20.3 29.1 16.9 32.1 65.2 1.2 26.0 23.5 71.2 1.2 20.2 23.3 67.6 1.2 19.3 20.8 76.0 1.2 19.0 18.0 72.2 1.3 17.2 19.0 70.0 1.4 18.5 8.2 8.2 13.2 3.5 30.6 7.8 7.8 10.9 2.2 37.3 8.0 8.0 9.9 2.4 42.4 8.1 8.1 10.7 2.6 47.7 7.4 7.4 9.9 3.2 47.6 8.4 8.4 11.2 3.7 51.8 20.6 12.9 5.6 2.1 4.3 11.7 4.5 21.9 15.6 4.6 1.3 3.8 13.7 3.7 21.3 17.1 4.0 1.4 3.1 11.3 3.1 21.1 15.8 3.6 1.5 3.2 12.0 3.0 23.0 17.2 3.6 1.9 3.0 13.0 3.0 20.2 15.2 3.3 2.2 2.7 11.1 2.7 CY07 CY08 CY09 CY10 CY11E CY12E
10
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Website: www.angelbroking.com
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Ambuja Cements No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.
Ratings (Returns) :
11