MOSL: ORIENT CEMENT (Buy)- Volume growth led profits
​Orient Cement:Volume growth led profits
(ORCMNT IN, Mkt Cap USD0.5b, CMP INR178, TP INR205, 15% Upside, Buy)
- Healthy volume growth led by market share gains: Revenue increased 36% YoY (-8% QoQ) to INR5.2b (est. of INR4.7b), as volumes grew 11.5% YoY to 1.31mt (est. of 1.2mt), led by market share gains by selling volumes at higher lead distances. Realizations increased 22% YoY (-2% QoQ) to INR3,996/t, better than estimates due to higher proportion of FOR sales and an increase in lead distances.
- YoY margin improvement led by better realizations: The sharp YoY margin improvement of 10pp to 14.3% was led by improved pricing in its focus markets of west and south. This was partially offset by higher cost/t (+9% YoY to INR3,426/t). Hence, EBITDA/t increased 303% YoY to INR570/t (-32% QoQ due to a seasonally weak quarter). Power & fuel cost/t declined 4% YoY due to higher usage of domestic coal. Freight cost/t increased 43% YoY due to a shift in invoicing toward FOR terms and an increase in lead distance. Hence, EBITDA increased 350% YoY (-36% QoQ) to INR746m (est. of INR625m), with a margin of 14.3% (+10bp YoY).
- Other key highlights: (1) PPC sales at 64% at overall operations. (2) Petcoke usage at 56% in Chittapur and 22% in Devapur on calorific value. 3) Lead distance increased to over 300km.
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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