MOSL: ORIENT CEMENT (Buy)-EBITDA beat led by higher volumes and realization
Orient Cement: EBITDA beat led by higher volumes and realization
(ORCMNT IN, Mkt Cap USD0.4b, CMP INR121, TP INR139, 15% Upside, Buy)
- Healthy volume growth: Revenue grew 12.7% YoY (+3% QoQ) to INR6.4b (est. of INR5.7b) in 1QFY19, as volumes increased 15% YoY to 1.6mt (est. of 1.48mt). Volume growth was on account of low base and healthy demand from underlying markets of Telangana and Maharashtra. Realizations stood at INR3,992/ton (+8% QoQ) versus our estimate of INR3,866/ton due to better-than-estimated prices in Maharashtra as also impact of higher FOR sales.
- Healthy realizations offset cost push: Cost/t increased 6% QoQ (+7% YoY) to INR3,459 due to 10%QoQ increase in P&F cost (unavailability of domestic coal leading to sourcing of higher cost alternatives). Freight cost/t increased 10% QoQ to due to higher diesel prices as also higher FOR sales. Employee cost also increased 22%QoQ. However, EBITDA/t stood at INR533 (-36% YoY, +20% QoQ; est. of INR498), resulting in EBITDA of INR854m (-27% YoY, +15% QoQ) versus our estimate of INR737m due to better than estimated realizations. Margins at 13.3% (-7.32pp YoY, +1.32pp QoQ). ORCMNT reported PBT of INR269m and PAT of INR160m (-59% YoY; est. of INR131m).
- Other key highlights: (1) PPC sales at 66% of overall operations. (2) Freight cost per tonne increased due to higher diesel prices (INR71/t impact) and higher FOR sales (+INR85/t impact) (3) lead distance continues to be under 300 kms.
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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