Ambuja Cements - EBITDA/te inches up to Rs1,500/te - ICICI Securities

Ambuja Cements' (ACEM) EBITDA at Rs9.6bn (up 61% YoY) was significantly higher than our / consensus estimates mainly owing to higher volumes and lower costs. Despite sharp increase in input prices, total cost/te increased just 2.7% QoQ (flat YoY) vs our expectation of 5.7% QoQ due to better cost efficiencies and leveraging MSA benefit with ACC. Volumes, including clinker sales, grew 53% YoY on a low base while realisation increased 1.6% YoY and 5.2% QoQ owing to strong growth in sales of premium products (up 69% YoY). EBITDA/te increased 5% YoY / 11% QoQ to a decadal high of Rs1,494/te (I-Sec: Rs1,417/te). Factoring-in better profitability, we raise our CY21E-CY22E EBITDA by 4-5%, increase our target multiple to 13x EV/E (earlier: 12x) and raise our target price to Rs464/share (earlier: Rs394/sh) based on 13x Jun'23E EV/E on quarterly rollover. Maintain BUY. Key risk: lower demand/prices.

- Q2CY21 standalone EBITDA at Rs9.6bn (up 61% YoY) was higher than our / consensus estimates. Total cost/te increased 2.7% QoQ and remained flat YoY. Raw material plus power and fuel cost rose only ~1% QoQ and fell 2.6% YoY as the impact of higher fuel prices was partially mitigated through operational efficiency programmes which include clinker factor optimisation, reduction in energy consumption and fuel mix optimisation. Freight cost/te increased only 2.2% YoY as the impact of rising diesel cost was partly offset by the company's focus on direct despatches, network optimisation, and lead distance reduction. Other expenses/te increased 14.6% YoY / 8.6% QoQ. EBITDA/te increased 5% YoY / 11% QoQ to Rs1,494/te. PAT grew 60% YoY to Rs7.2bn.

- Standalone revenues up 56% YoY to Rs33.4bn (I-Sec: Rs32.7bn). Realisation increased 1.6% YoY (5.2% QoQ) to Rs5,203/te supported by 69% YoY growth in special/premium products, which contributed 12% of total sales in Q2CY21. Volumes including clinker sales increased 53% YoY on a low base to 6.42mnte (>85% utilisation) led by strong growth in the west region. Management believes cement demand is likely to show strong recovery in CY21 backed by higher government infrastructure spending.

- Board has approved 1.5mnte cement capacity expansion at the existing grinding unit at Ropar in Punjab. Greenfield project at Marwar Mundwa, Rajasthan, is likely to commence operations in Q3CY21. This project will enhance the company's clinker capacity by 3mnte and cement grinding capacity by 1.8mnte.

- Consolidated revenues grew 52% YoY to Rs69bn, broadly led by volumes. Consolidated EBITDA rose 63% YoY to Rs18.3bn while PAT, after minority interest, grew 92% YoY to Rs8.7bn.

Shares of AMBUJA CEMENTS LTD. was last trading in BSE at Rs. 408.8 as compared to the previous close of Rs. 408. The total number of shares traded during the day was 265244 in over 4507 trades.

The stock hit an intraday high of Rs. 413.9 and intraday low of 401.55. The net turnover during the day was Rs. 108432414.

Source : Equity Bulls

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