MOSL: ORIENT CEMENT (Buy)-Dismal performance due to weak realization
Orient Cement: Dismal performance due to weak realization
(ORCMNT IN, Mkt Cap USD0.5b, CMP INR156, TP INR179, 15% Upside, Buy)
- Realization miss due to weaker pricing in focus markets: Revenue grew 12% YoY (-2% QoQ) to INR5.1b (est. of INR5.9b), as volumes rose 9% YoY to 1.37mt (est. of 1.44mt). However, volumes were lower than estimated, as, unlike in 2QFY18, it sold less volume in distant markets. Realizations stood at INR3,737/ton (-6% QoQ; est. of flat QoQ) due to weaker pricing and also a reduction in FOR sales on a sequential basis.
- EBITDA/t at INR286 (-21%YoY; -50% QoQ): Cost/t rose 5% YoY/1% QoQ to INR3,451 due to a rise in power & fuel cost/t, driven by higher fuel prices. Freight cost/t increased 9% YoY to INR994 due to higher FOR sales and diesel prices, but declined 8% QoQ due to a reduction in lead distance by ~16km. Hence, EBITDA/t declined 21% YoY/50% QoQ to INR286 (est. of INR728). EBITDA declined 14% YoY/48% QoQ to INR391m (est. of INR1.0b), led by weaker-than-estimated realizations and lower volumes. ORCMNT reported a PBT loss of INR248m (est. of PBT of INR438m). However, reported PAT loss was restricted to INR177m due to deferred tax of INR71m in 3QFY18.
- Other key highlights: (1) PPC sales at 64% of overall operations. (2) Petcoke usage at 75% in Chittapur and 13% in Devapur on calorific value. 3) Lead distance reduced to less than 290km in 3QFY18.
Orient Cement Limited is an India-based company engaged in the manufacturing and sales of cement. The Company's products include Birla A1 Premium Cement, Birla A1 Premium Cement-OPC 53 Grade and Birla A1 Premium Cement-OPC 43 Grade. The Company's product mix includes ordinary Portland cement (OPC) and Pozzolana Portland cement (PPC), which are sold under the brand name of Birla A1. The Birla A1 Premium Cement is an inter-grinding of Portland cement clinker, gypsum and fly ash. The Company is part of the CK Birla Group. The Company's manufacturing facilities are located at Devapur in Telangana, Jalgaon in Maharashtra and Chittapur in Karnataka. The cement production capacity of the Devapur plant is approximately three metric tons per annum (MTPA). The Company operates a clinker grinding plant in Jalgaon, Maharashtra of approximately two MTPA cement production capacity.
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