Ambuja Cements - 2QCY12 Results Update - Motilal Oswal

Ambuja Cements' 2QCY12 performance is above estimates with EBITDA of INR7.2b (v/s est INR6.6b) driven by above estimated realizations and in-line cost. Key highlights:

- Volumes grew 6.5% YoY (-9% QoQ) to 5.63MT (v/s est 5.8MT) incl clinker. Realization improved by 7% QoQ (10.7% YoY) to INR4,556/ton (v/s est INR4,380/ton). Net sales improved by 18% YoY (-3% QoQ) to INR25.7b (v/s est INR25.5b).

- EBITDA/ton improved by ~INR80 QoQ to INR1,283 in 1QCY12 (v/s est INR1,138). Costs were largely in-line with estimates, as higher than freight and other expenses were offset by lower than estimated fuel cost.

- EBITDA grew 23% YoY (-3% QoQ) to INR7.2b (v/s est INR6.6b) and margins were flat QoQ (+30bp YoY) at 28.2% (v/s est 26%). Adj PAT grew 35% YoY (-8% QoQ) to INR4.7b (v/s est INR4.3b).

- The board has announced interim dividend of INR1.4/sh (v/s INR3.2/sh for CY11).

Valuation and view: We are upgrading our EPS for CY12 by 8% to INR11.7 and CY13 EPS by 5% to INR13.3, to factor in higher than estimated realizations. We are factoring in volume CAGR of 9.2% (v/s 11% earlier) in CY12-13. We are modeling in realization improvement of ~INR21/bag in CY12 (~INR7/bag lower than 2QCY12 level) and INR10/bag in CY13. The stock trades at 13.5x CY13E EPS, 7.5x EV/EBITDA and USD150/ton. Maintain Buy with target price of INR210 (~9x CY13E EV/EBITDA).

Source : Equity Bulls

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