Ambuja Cements (SELL): Lower-than-expected EBITDA/tonne led by QoQ realisation decline - Ambit

Ambuja Cements' (ACEM) 1QCY13 results surprised us on account of lower-than-expected realisation and unitary power and fuel and freight cost. Whilst volume was 4% higher than our expectation, realisation declined by 4% QoQ as against our expectation of a 2% increase.

Overall costs were in line with our estimates, as the lower-than-expected power and fuel and freight costs were offset by higher-than-expected raw material costs and other expenses. EBITDA/tonne declined by 34% YoY and 7% QoQ (29% lower than our expectation) on account of lower realisation. Due to this and a higher tax rate, adjusted PAT was 30% lower than our estimates at Rs2,729mn. We expect unitary profit to decline further in 2QCY13, as realisation will be lower on account of price cuts and cost pressure will increase on account of increase in power and fuel (albeit marginal) and freight cost (due to a 5.8% increase in rail freight).

We expect further downgrades to our sub-consensus estimates for CY13. The stock is trading at 10.6x CY13 EBITDA. We maintain our SELL stance.

Source : Equity Bulls

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