MOSL: AMBUJA CEMENTS (Buy)-Muted volume growth-utilization headroom lends confidence
Ambuja Cements: Muted volume growth; utilization headroom lends confidence
(ACEM IN, Mkt Cap USD7.3b, CMP INR246, TP INR283, 15% Upside, Buy)
- Volume growth remains subdued: 1QCY17 revenue of INR25.33b (+5% YoY) came in below estimate of INR25.6b, led by higher-than-expected decline in realizations and in-line volumes. Realizations of INR4,208 (+4.4% YoY, -2.5% QoQ) missed estimate of INR4,266 due to weak prices in the western market. Volumes declined 1% YoY, but grew 18% QoQ (in-line) to 6.02mt due to normalization of volumes in the month of March 2017.
- Sequential improvement in profitability: EBITDA fell 14% YoY (+24% QoQ) to INR3.65b, translating into a margin of 14.4% (-3.3pp YoY, +1pp QoQ). EBITDA/ton increased 5% QoQ to INR606 (+INR27 QoQ, -INR107 YoY) due to positive operating leverage. Depreciation declined 62% YoY to INR1.46b, as base quarter depreciation was restated to INR3.8b due to amortization of goodwill. Hence, PAT increased 4x YoY (+52% QoQ) to INR2.46b.
- Power & fuel and freight cost up QoQ: While unitary cost improved 4% QoQ to INR3,602/tonne in 1QCY17, it was primarily led by positive operating leverage. Freight cost rose 8% QoQ due to higher diesel prices and higher leads for fly ash souring. Power & fuel cost/t increased 10% QoQ due to rising fuel prices.
Ambuja Cement is a holding company. Co. is engaged in the manufacture and bulk export of cement and clinker products. Through its subsidiaries, Co. is engaged in investment holding in cement industries; finance services; the manufacture of cement; and property development and construction projects.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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