MOSL: ORIENT CEMENT (Buy)-Profitability uptick led by high pricing
​Orient Cement: Profitability uptick led by high pricing
(ORCMNT IN, Mkt Cap USD0.5b, CMP INR160, TP INR185, 15% Upside, Buy)
- Muted volume growth: 1QFY18 revenue increased 30% YoY (-5% QoQ) to INR5.68b (est. of INR5.92b), as volume growth was flat YoY at 1.40mt (est. of 1.6mt) on account of destocking ahead of GST roll-out. Realizations increased 18% QoQ (+30% YoY) to INR4,065/t (est. of INR3,693) due to sharp pricing improvement in AP/Telangana and also Maharashtra (~84% of sales volume). Realization improvement looks sequentially overstated by ~INR100/t due to lesser proportion of ex-factory sales in 1QFY18.
- Favorable pricing improves margins: Cost/ton rose 7% QoQ (+13% YoY) to INR3,229 (est. of INR3,029), led by (a) increase of 6% YoY in power/fuel cost due to higher petcoke prices, partially offset by a rise in proportion of petcoke consumption, (c) increase of 43% YoY in freight cost/t due a shift in invoicing toward FOR terms. EBITDA thus rose 189% YoY (+55% QoQ) to INR1,169m (est. of INR1,065m), with margin at 20.6% (9.3% in 1QFY17). EBITDA/ton grew INR400 QoQ (+INR546 YoY) to INR836 (est. of INR665).
- Other key highlights: (1) PPC sales at 68% of overall operations. (2) Petcoke usage at 96% in Chittapur and 32% in Devapur on calorific value. 3) Lead distance maintained at ~280km. (4) Market mix tilted toward west at 47%, with south at 37% and others at 16%.
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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