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MOSL: AMBUJA CEMENTS (Neutral)-Expansion to improve near-term volumes but growth visibility remains weak beyond CY22

AMBUJA CEMENTS: Expansion to improve near-term volumes but growth visibility remains weak beyond CY22

(ACEM IN, Mkt Cap USD10.7b, CMP INR402, TP INR385, 4% Downside, Neutral)

 

• Ambuja Cements (ACEM)’s 2QCY21 results highlight the company’s continued focus on cost reduction, leading to the highest ever EBITDA/t of INR1,495/t. Volumes also grew 53% YoY on the lower base of Jun’20.
• The commissioning of the Marwar–Mundwa capacity by Sep’21 should drive a 12% CAGR in volumes over CY20–23E. We raise our EPS estimates by 8%/8% for CY21/CY22, factoring in better margins. However, we maintain our Neutral rating on weak growth visibility beyond CY22.

 Higher volumes and lower cost drive 24% beat on EBITDA

• Revenue / EBITDA / Adj PAT rose 55%/61%/59% YoY to INR33.7b/INR9.6b/INR7.2b, beating our estimate by 9%/24%/22% – led by higher volumes, lower cost, and better realization.
• Volumes were up 53% YoY to 6.42mt (est. 5.93mt) on account of a lower base. Specialty product volumes grew 69% YoY.
• Cement realization was up 5.3% QoQ (+1.7% YoY) to INR5,206/t v/s our est. of INR5,163/t; blended realization was up 5% QoQ to INR5,251/t (+1% YoY).
• Blended cost per ton was lower than expected at INR3,756/t (+3% QoQ; flat YoY; -4% v/s est.) on account of higher clinker production (with closing inventory being netted out from the cost). This led to better-than-expected fixed cost absorption.