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Results Update / Review

Ambuja Cements: 3QCY12 operating performance was above estimates, with adj EBITDA of INR5.65b.

18-Oct-2012

Ambuja Cements' 3QCY12 operating performance was above estimates, with adj EBITDA of INR5.65b (v/s est INR5.5b), driven by above estimated realizations and in-line cost. 

Key highlights include:
  • Volumes were flat YoY (-15% QoQ) at 4.79mt (v/s est 4.9mt), including clinker. Realizations declined marginally by 0.6% QoQ (20.6% YoY) to INR4,529/ton (v/s est INR4,476/ton). Net sales improved by 20% YoY (-15% QoQ) to INR21.7b (v/s est INR21.7b).

  • EBITDA/ton declined by ~INR100/ton QoQ to INR1,180 in 3QCY12 (v/s est INR1,136). Costs were largely in line with estimates, as higher-than-estimated other expenses were offset by lower-than-estimated staff cost.

  • Adj EBITDA grew by 95% YoY (-22% QoQ) to INR5.65b (v/s est INR5.5b) and margins declined 210bp QoQ (+10pp YoY) to 26.1% (v/s est 25.4%). Adj PAT grew by 97% YoY (-28% QoQ) to INR3.38b (v/s est INR3.56b), impacted by higher tax provisioning.

  • 3QCY12 had a prior period reversal of claim provisioning of ~INR499m, which was reported in freight cost (~INR180m pertaining to 1HCY12) and other expenses (~INR318m pertaining to previous years).

  • Contrary to media contemplation of ~2% royalty, there has been no levy of royalty by Holcim on Ambuja Cement.

  • Valuation and view: Our estimates remain unchanged, as benefit of higher realizations is offset by a higher tax. We factor 8% volume CAGR in CY12-13 for ACEM. We assume a realization improvement of ~INR26/bag in CY12 and INR10/bag in CY13 (~INR8/bag higher than 3QCY12 realizations). The stock trades at 15.3x CY13E EPS, 8.8x EV/ EBITDA and USD185/ton. Maintain Buy with a target price of INR208 (~9x CY13E EV/EBITDA).

 
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