Arihant Capital Markets - Ambuja Cement 4QCY17 Result Update - HOLD

Ambuja Cements Ltd. reported strong set of numbers for the quarter ended December, 2017. Net profit for the quarter came at Rs 338 crore vs. Rs 179 crore in corresponding quarter of the previous year increased by 89% YoY. Total income of the company grew by 22% to Rs 2,713 crore for quarter under review as compared to Rs 2,224 crore for the corresponding quarter of previous year. Top line grew strongly on account of higher sales volume growth and clinker production but company faced cost pressures on account of rising input costs on fuel and petcoke.

EBITDA

EBITDA for the quarter came in at Rs 541 crore increased by 62% as compared to Rs. 335 crore in corresponding quarter of previous year. EBITDA margins for the quarter stood at 20% compared to 15% YoY basis. This was supported by strong volumes growth however, was offset by lower realization. EBITDA per ton was up by 20% YoY.

Volumes

Cement volume for the quarter was up by 17% to 5.87 million tonnes (MT) as compared to 5 million tonnes in corresponding quarter of previous year.

Recent developments

Ambuja Cements Ltd has made investment in Greenfield plant. The company proposes to set up a 3.1 million tonnes clinker plant at Marwar Mundwa in Rajasthan. The company's board has approved initial investment of Rs. 1,391 crore towards first phase of 1.7 MT capacity which expected to commissioned in 2020.

Valuation

Government announced in current budget to improve infrastructure and affordable housing projects. So going forward demand for cement will see good growth in Indian economy. Construction and Infrastructure sector are identified as one of the key sectors that will help improve overall economic growth. Infrastructure projects in the areas of power, irrigation, roads, metros and railways, as well as dedicated freight and industrial corridors, are likely to generate strong cement demand in the country. Company is focusing on improving rural income under different programmes like PMKSY and PMGSY which will increase allocation for road construction and irrigation projects. We have valued stock on EV/EBITDA of 22.5(x) its CY19 estimates and have arrived at a fair value of Rs 283 per share. We have 'HOLD' rating on the stock.

Shares of AMBUJA CEMENTS LTD. was last trading in BSE at Rs.261.65 as compared to the previous close of Rs. 263.1. The total number of shares traded during the day was 212143 in over 2596 trades.

The stock hit an intraday high of Rs. 269 and intraday low of 260.25. The net turnover during the day was Rs. 56092731.

Source : Equity Bulls

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