Ambuja Cement - Q2CY20 First Cut - ICICI Securities

(CMP: Rs. 201; MCap: Rs. 39,901 crore)

Ambuja Cements has recorded strong operating performance with EBITDA margin expansion of 389 bps YoY to 27.3%. In spite of complete lockdown in April, volume decline of 28% YoY was more than offset by lower costs, which fell by 30.6% on YoY basis. On a broad basis, the results are better than our estimates on all parameters.

Q2CY20 Earnings Summary

- Revenues for the quarter stood at Rs. 2177 crore (vs I-direct estimate of Rs. 2091 crore). Sales volume declined by 28% YoY to 4.19MT (vs I-direct estimate of 4.08MT), Realisations improved sharply by 6.0% QoQ (up 1.5% YoY) to Rs. 5195/t (vs. I-direct estimate of Rs. 5,121/t) mainly due to firm pricing environment

- EBITDA margin expanded by 389bps YoY to 27.3% (far ahead of I-direct estimate of 18.9%). EBITDA expansion was driven by better realizations, enhanced focus on supply chain management, contract negotiations and fuel efficiencies that helped addressing the impact of lower volumes

- On the cost front, power & fuel and freight cost per tonne declined by 32% YoY due to improvement in operational efficiencies and lower prices. Further lower discretionary spend also led to sharp decline of 40% YoY in other cost. Accordingly, EBITDA/t increased 18% YoY (35.9% QoQ) to Rs. 1421/t (I-direct estimate of Rs. 966/t). Healthy EBITDA margin expansion led to company reporting EBITDA of Rs. 595 crore, down 14.8% YoY (above I-direct estimates of Rs. 394 crore). Other income were also higher by 231% YoY to Rs. 192 as it included dividend income of Rs. 132 crore from ACC

- Beat on margin and higher other income led to company reporting PAT growth of 10% YoY to Rs. 453 crore (vs I-direct estimate: 217 crore)

Economic activities have picked up post Government's decision to re-start the economy in the phased manner. With resumption of economic activities, Cement demand is also expected to rebound on account of normal monsoon, various policy support measures taken to enhance rural and agricultural incomes. Further, continued spend on infrastructure development and affordable housing is expected to boost demand growth in the long-term. The company has strong balance sheet which in turn would help to pass through this current challenging environment. We would be coming out with detailed report soon.

Shares of AMBUJA CEMENTS LTD. was last trading in BSE at Rs.201 as compared to the previous close of Rs. 197.8. The total number of shares traded during the day was 364648 in over 3481 trades.

The stock hit an intraday high of Rs. 202.45 and intraday low of 196.6. The net turnover during the day was Rs. 73027964.

Source : Equity Bulls

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