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MOSL: ORIENT CEMENT (Buy)-Profitability led by cost efficiencies

ORIENT CEMENT: Profitability led by cost efficiencies

(ORCMNT IN, Mkt Cap USD0.4b, CMP INR144, TP INR170, 18% Upside, Buy)

 

• Utilization scales up to 84%: Revenue grew 4% YoY (+21% QoQ) to INR6.2b (est. of INR6.5b) in 4QFY18, as volumes fell 3% YoY to 1.68mt (est. of 1.8mt). Realizations stood at INR3,696/ton (-1% QoQ) versus our estimate of INR3,596 due to better-than-estimated prices in underlying markets.
• Cost efficiencies drive profitability: Cost/t declined 6% QoQ (+8% YoY) to INR3,251 due to positive operating leverage and lower P&F cost (better efficiency parameters). Freight cost/t increased 6% QoQ to INR1,055 due to higher diesel prices. Thus, EBITDA/t stood at INR445 (+2% YoY, +56% QoQ; est. of INR244), resulting in EBITDA of INR746m (-1% YoY, +91% QoQ) versus our estimate of INR440m. ORCMNT reported PBT of INR182m and PAT of INR128m (-23% YoY; est. of a loss of INR38m).
• Other key highlights: (1) PPC sales at 67% of overall operations. (2) Petcoke usage at 80% in Chittapur and 0% in Devapur on calorific value. (3) Lead distance up by 2% YoY.
• FY18 performance: FY18 volumes grew 4% to 5.75mt and realizations increased 14%, resulting in net sales of INR22.2b (+19% YoY). EBITDA increased 71% YoY to INR3b, resulting in EBITDA/t of INR531. PAT stood at INR442m, as against a loss of INR321m in FY17.