MOSL: ORIENT CEMENT (Buy)-Solid performance led by higher realization and cost savings
ORIENT CEMENT: Solid performance led by higher realization and cost savings
(ORCMNT IN, Mkt Cap USD0.3b, CMP INR102, TP INR119, 17% Upside, Buy)
- Utilization at 92%: Revenue grew 21% YoY to INR7.5b (our estimate: INR7b), as volumes increased by 9% YoY to 1.83mt (our estimate: 1.8mt). Realizations increased 11% YoY (+8% QoQ) to INR4,101/ton (our estimate: INR3,952) due to healthy prices in the underlying markets.
- Cost saving supports profitability: Cost/t decreased 8% QoQ (flat YoY) to INR3,265 owing to a decline of 3% QoQ in freight cost/t and 10% QoQ in raw material cost/t. Thus, EBITDA/t stood at INR835 (+88% YoY, +3.3x QoQ; our estimate: INR471), resulting in EBITDA of INR1.53m (+105% YoY; our estimate: INR840m); margin expanded 8.34pp YoY (+13.74pp QoQ) to 20.4%. Tax rate stood at 34% (29.8% in 4QFY18), as against our estimate of 24%. PAT increased 4.8x YoY to INR620m versus our estimate of INR199m.
- Other key highlights: (1) PPC sales were at 59% of overall operations in 4QFY19 v/s 67% in 4QFY18. (2) PPC sales stood at 61% in FY19 v/s 66% in FY18. (3) Distance travelled well under 300km for the quarter. (4) Freight cost/t increased 12% YoY to INR1,155 in FY19, primarily on account of higher FOR volume and higher diesel prices during the year.
- FY19 performance: Volumes rose 12% YoY, resulting in sales/EBITDA growth of 13%/2%. Realizations increased 2%, but higher cost/t (+3% YoY) led to an 8% YoY decline in EBITDA/t to INR487. PAT increased 8% YoY to INR476m.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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