Dear All,
Forwarding you the Result Update on Ambuja Cements for1QCY2011 with a Neutral recommendation.
During 1QCY2011, Ambuja Cements (Ambuja) posted 10.9% yoy growth in its net sales to `2,207, aided by growth in volumes (up 6.8% yoy) and higher realisations (up 3.8% yoy). Realisations were higher during the quarter due to substantial price hikes in the northern and western region. At current levels,
we believe the stock is fairly priced, owing to which we maintain our Neutral view on the stock.
Bottom line down 11.8% yoy due to margin contraction and lower other income: For 1QCY2011, Ambuja posted 10.9% yoy growth in its net sales to `2,207cr. However, OPM for the quarter was lower by 144bp yoy to 28.2%, largely on account of a steep increase in power and fuel costs. On a positive note, raw-material costs declined by 44.9% yoy due to elimination of high-cost external clinker purchase. For 1QCY2011, Ambuja’s net profit fell by 11.8% yoy to `407cr on account of higher depreciation costs and lower other income.
Outlook and valuation: We expect cement prices to dip in the near term
due to the onset of monsoons. The production discipline adopted by cement manufacturers is expected to weaken with upcoming capacities. Further, the full impact of the price hike carried out by Coal India is expected to be felt from 2QCY2011. We expect Ambuja’s top line to register a 13.5% CAGR over
CY2010–12, with dispatches expected to record a 9.3% CAGR on the back of capacity addition. At current levels, the stock is trading at fair valuations of 9.3x EV/EBITDA and EV/tonne of US$163 on CY2012 estimates. Hence, we maintain our Neutral view on the stock.
Kindly clink on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6864 / 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6864,6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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