Ambuja Cements Ltd. - GEPL Capital

Q4CY11 – Strong Y-o-Y performance, driven by higher realisation

- Net sales for Q4CY11 grew by 29% on Y-o-Y basis to Rs.23,577 mn. This was mainly driven by higher volumes and better realisation.

- EBIDTA margin for Q4CY11 stood at 19.1% in Q4CY11, showing a Y-o-Y decline of 27.5bps. However on Q-o-Q basis margin improved by 165bps.

- PAT for the Q4CY11 stood at Rs.3,024 mn (PAT included an exceptional cost of Rs.242.5 mn pertaining to change in method of measurement of compensation cost relating to ESOPS adopted with retrospective effect in Q4CY11), however excluding the exceptional item mentioned above the PAT would have been higher by Rs.332.1 mn.

Result Highlights

Strong realisation coupled with better volumes helped Ambuja report good numbers for Q4CY11

Realisation of cement per bag for Q4CY11 stood at Rs.213/bag showing a growth of 16.2% Y-o-Y, this was mainly on account strong demand in the region where Ambuja operates especially north and west, where company gets 80% of its revenue. The volumes grew by 11% Y-o-Y to 5.54 mn MT in Q4CY11.

Total Expenditure per bag rose by 16.6% on Y-o-Y basis to Rs.172. This was mainly on account of increase in raw material costs, freight costs and Other expenditure which rose by 82.9%, 12% and 11.8% on Y-o-Y basis respectively. However the power and fuel costs per bag declined by 4.8% Y-o-Y.

Note: During the quarter company has retrospectively changed its method of measurement of compensation cost relating to ESOPS from intrinsic value to fair value method, accordingly company has recognised an additional expenditure of Rs.332.1 mn, as a result amount Rs.242.5 mn relating to earlier expense has been disclosed as exceptional item.

Valuation & Viewpoint

Over last two years, EV per MT of Ambuja in US$ terms has been in the range of US$112-205. At current market price the stock is trading at US$205/MT at its two years high and at a 42.9% discount to its all time high of US$293/MT. We expect the prices to remain firm over next 2-3 months and also historically Q4 has been a good quarter for cement, hence this should help the company in further increasing its margins going forward. However as a result of sharp run up seen in th.e stock over last couple of weeks, we believe the upside is limited for the stock.

Source : Equity Bulls

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