Retain BUY Rating on Orient Cement - Utilisation soars to 93%, bolstering profit - HDFC Securities

Mr Rajesh Ravi, Institutional Research Analyst, HDFC Securities and Mr. Saurabh Dugar, Institutional Research Analyst, HDFC Securities

Orient Cement (ORCMNT) reported very strong performance in 4QFY21, as it ramped up utilisation to 93% (multi-year high) on healthy pricing in its markets. These more than offset the impact of fuel and freight inflation as unitary EBITDA soared to INR 1,095/MT (+38/9% YoY/QoQ). In 4Q, its net sales/EBITDA/APAT grew 38/48/85% QoQ to INR 8.3/2.0/1.0bn respectively. We continue to like ORCMNT for its operating efficiency and balance sheet focus. We retain the BUY rating with a revised target price of INR 155/share (7x Mar'23E EBITDA).

4QFY21 performance: Sales volume grew 18% YoY to 1.85mn MT on robust demand. Utilisation firmed up to 93% (vs 68/79% QoQ/YoY). NSR firmed up 1% QoQ, taking YoY gains to 8%. Unitary opex fell 1% QoQ (on operating leverage gains), pulling down YoY inflation to 1% YoY. Input and freight cost rose QoQ, hit by fuel inflation. ORCMNT has re-classified limestone mining expense (removed it from other expenses and added it to raw materials costs) during 4QFY21 and has restated its previous numbers accordingly.

FY21 performance and outlook: Sales volume recovered strongly in 2H, cushioning the total fall to 13% YoY (to 5.05 mn MT). NSR grew 10% YoY to INR 4,602/MT as prices remained firm throughout the year, post early price rise in FY21. As opex remained flat YoY, unitary EBITDA grew 65% YoY to an all-time high of INR 1,090/MT. APAT, thus, firmed up 1.5x YoY to INR 2.15bn on healthy EBITDA and 24% YoY decline in finance cost. The company expects to increase its capacity to 11.5mn MT by FY24E (debottleneck of 0.5mnMT and 3mnMT brownfield at Devapur plant) at Capex of ~INR 20bn (including cost for 10MW WHRS plant). Gross/net debt fell to INR 8.0/6.5bn in Mar'21 from INR 12.3/11.9bn YoY due to a sharp rise in operating cash flows and limited Capex outflow. We have revised FY22/23E by 15/12%, factoring in better volumes and lower unitary opex outlook.

Shares of Orient Cement Ltd was last trading in BSE at Rs.126.75 as compared to the previous close of Rs. 125.85. The total number of shares traded during the day was 97070 in over 1509 trades.

The stock hit an intraday high of Rs. 129 and intraday low of 126. The net turnover during the day was Rs. 12346253.

Source : Equity Bulls

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