Ambuja Cements Ltd - Q1CY21 Result Update - YES Securities

Result Highlights

- Cement volumes for the quarter was in-line with our estimates at 7.17 MT; translating into 24.5% y/y growth. Low base and robust demand scenario in operating markets led to healthy volume growth.

- Blended NSR/te was Rs 5,051 during the quarter witnessing a moderate improvement of ~3% y/y (vs. est. of +3.6% y/y). Company's special product volumes grew 82% y/y aiding to improvement in net realization for the company.

- Accordingly, net sales for the company stood at Rs 36.2 bn - a growth of 28% y/y and 1% above our estimates.

- Company's operational performance has been a very positive surprise during the quarter. Absolute EBITDA at Rs 9.7 bn grew by 62% y/y and was 21% above our estimates/34% above consensus estimates. EBITDA/te came in at robust levels of Rs 1,362 (est. of Rs 1,145); a healthy improvement of 30% y/y. Beat on operational level was on the back of (1) stringent control on fixed costs, (2) lower than expected clinker cost, (3) improvement in operating efficiencies on freight side and (4) optimization of sales mix.

- Net profit for the company stood at Rs 6.65 bn which grew by 67% y/y.

Our View:

- Ambuja delivered exceptional set of nos for Q1CY21 with cement volumes in-line with estimates at 7.17 MT (+24.5% y/y and 1% above est.) but a massive beat on operational level. Company's EBITDA came in at Rs 9.77 bn; a sharp increase of 62% y/y and 21% above our estimates/34% above consensus estimates. Although realizations were in-line with our estimates, stringent control on fixed costs along with improvement in operating efficiencies on freight and optimization of sales mix resulted into outperformance on EBITDA level.

- Company plans to commission Greenfield integrated plant at Marwar Mundwa (3 MTPA clinker and 1.8 MTPA grinding) by Q3CY21E providing visibility of incremental volume dispatches of 5 MT in medium term. Accordingly, in the near term, we expect volume/EBITDA CAGR of 14.2%/19.4% over CY20-CY22E. Balance sheet would continue to grow stronger as we expect net cash reserves of Rs 55.3 bn by CY22E vs Rs ~29 bn in CY20 despite capex plan of ~Rs 21 bn during the same period in the form of on-going capacity addition and investments in WHRS.

- To support growth in the longer term, company has ambitious plans of scaling to 50 MTPA capacity (from ~30 MTPA currently). However, there is lack of clarity on timelines of the same. Company is evaluating Eastern and Maharashtra markets for capacity addition in longer term. We believe execution of aforementioned plans would translate into secular and profitable growth for the company.

- At CMP of Rs 314, Ambuja is trading at EV/EBITDA of 11.2x on CY22E. We assign an EV/EBITDA multiple of 13x to its standalone business on CY22E and 20% holdco discount to its stake in ACC. Accordingly, we arrive at a TP of Rs 355 for Ambuja, translating into 13% upside. We have an ADD rating on the stock.

- Key Risk: Further lockdowns across states due to second wave of COVID would hamper volume growth and timelines of capex commissioning.

Shares of AMBUJA CEMENTS LTD. was last trading in BSE at Rs.309 as compared to the previous close of Rs. 314. The total number of shares traded during the day was 673516 in over 9208 trades.

The stock hit an intraday high of Rs. 319.85 and intraday low of 306.85. The net turnover during the day was Rs. 209992423.

Source : Equity Bulls

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