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Ambuja Cement
SELL
INDUSTRY CEMENT Weak despite the beat
CMP (as on 20 Feb 2017) Rs 239
Ambuja Cement (ACEM) reported an EBITDA/t of Rs Highlights of the quarter
Target Price Rs 200 579/t (vs. estimate of Rs 367/t, 5.1% YoY, -3.9% Despite a ~9% decline in volumes, other operating
Nifty 8,879 QoQ). The beat was largely on account of lower P&F expenses remained flat at Rs 5.2 bn. -2.8% YoY, 4.5%
Sensex 28,662 costs vs estimates, (Rs816/t, 0.6 % YoY, -14.6% QoQ QoQ). Cement operating costs remain higher than
KEY STOCK DATA vs 10 % QoQ jump estimated), most likely driven by industry averages (Rs 3,737/t, flat QoQ and YoY) and
use of low- cost clinker inventory (Rs 804 mn due to will continue to drag profitability lower. Other income
Bloomberg/Reuters ACEM IN
inventory changes). Volumes declined ~8.7% YoY continues to decline due to utilisation of proceeds for
No. of Shares (mn) 1,986 (5.0 mTPA), while realisations remained flat (Rs the ACC stake acquisition.
MCap (Rs bn) / ($ mn) 475/7,095 4,316/t, 1.1% YoY, -1.4% QoQ).
6m avg traded value (Rs mn) 637 We remain cautious on sector valuations on the Near-term outlook: Except Gujarat, volumes remain
whole (12-16x 1Yr Fwd EV/EBITDA), and ACEM in weak in most operating regions for ACEM. Pricing,
STOCK PERFORMANCE (%)
particular (14.3/10.6x FY18/19 EV/EBITDA). Further, initially subdued, especially in Gujarat, has recovered in
52 Week high / low Rs 282 / 185 the second half of February this year. We expect
benefits from the merger with ACC continue to be
3M 6M 12M evasive. We have largely retained our earnings March to be better, as the effect of the cash crunch
Absolute (%) 20.4 (13.4) 22.8 estimates, which factor in strong volume and recedes and activity in poll-bound states kicks off.
Relative (%) 10.8 (15.5) 1.9 realisations growth (Refer pg. 3). Maintain SELL with Profitability is likely to remain subdued in the near-
a TP of Rs 200 (ACC/ACEM at 8.0/9.0x CY18 term, and ACEM will continue to lag peers in all
SHAREHOLDING PATTERN (%)
EV/EBITDA). likelihood.
Promoters 63.61
FIs & Local MFs 10.68 Financial Summary (Standalone)
(Rs mn) 4QCY16 4QCY15 YoY (%) 3QCY16 QoQ (%) CY14 CY15 CY16 CY17E CY18E
FPIs 18.53
Net Sales 21,967 23,558 (6.8) 20,043 9.6 99,107 93,683 91,604 1,16,005 1,32,531
Public & Others 7.18
EBITDA 2,947 3,042 (3.1) 2,760 6.8 19,741 15,357 16,825 23,623 29,970
Source : BSE
PAT 1,864 1,657 12.6 2,770 (32.7) 12,849 8,565 12,055 15,279 21,214
Ankur Kulshrestha Diluted EPS (Rs) 0.94 1.08 (13.0) 1.40 (32.7) 8.32 5.52 6.07 7.7 10.7
ankur.kulshrestha@hdfcsec.com P/E (x) 28.6 43.4 29.2 23.0 16.6
+91-22-6171 7346
EV / EBITDA (x) 23.4 30.1 21.1 14.3 10.6
Sarfaraz Singh RoE (%) 13.1 8.4 13.5 19.2 23.3
sarfaraz.singh@hdfcsec.com Source: Company, HDFC sec Inst Research
+91-22-6171 7331 P/E and EV/EBITDA multiples based on standalone nos and Market cap/EV adjusted for embedded ACC stake
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters
AMBUJA CEMENT : RESULTS REVIEW 4QCY16
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AMBUJA CEMENT : RESULTS REVIEW 4QCY16
Peer Valuation
MCap CMP TP EV/EBITDA (x) P/E (x) EV/T (US$)
We look for better entry Company Rating
(Rs bn) (Rs) (Rs) FY18E FY19E FY18E FY19E FY18E FY19E
points UltraTech Cement 1,034.1 3,757 NEU 3,380 16.0 12.8 28.3 22.3 231 219
Shree Cement 540.8 15,522 NEU 13,907 16.2 11.2 34.7 23.1 210 189
Ambuja Cement1 474.0 239 SELL 200 14.3 10.6 23.0 16.6 161 153
ACC1 274.9 1,461 SELL 1,300 12.4 9.0 23.6 16.1 117 114
Ramco Cements 161.1 677 SELL 456 15.2 12.7 26.2 21.1 192 186
Birla Corp 54.7 710 NEU 678 9.5 8.8 22.1 20.1 96 90
Orient Cement 27.2 133 BUY 165 10.3 7.6 32.2 12.4 62 60
Sanghi Industries 14.3 65 BUY 83 5.8 3.9 10.1 6.3 65 57
Note: Prices as of Feb 20, 2017, close. US$: INR = 67
1
December YE
Key Assumptions
CY14 CY15 CY16E CY17E CY18E
Cement volumes (mn T) 22.1 21.8 21.4 23.7 25.1
Realisations (Rs/T) 4,491 4,303 4,289 4,897 5,290
P&F cost/tonne (Rs/T) 1,007 944 858 1,040 1,045
Raw material cost/tonne (Rs/T) 309 332 364 402 432
Freight cost/tonne (Rs/T) 1,105 1,137 1,158 1,208 1,283
EBITDA/tonne 843 658 738 948 1,145
Source: Company, HDFC sec Inst Research
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AMBUJA CEMENT : RESULTS REVIEW 4QCY16
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Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research
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AMBUJA CEMENT : RESULTS REVIEW 4QCY16
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AMBUJA CEMENT : RESULTS REVIEW 4QCY16
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AMBUJA CEMENT : RESULTS REVIEW 4QCY16
RECOMMENDATION HISTORY
Date CMP Reco Target
Ambuja Cements TP
11-Feb-16 196 NEU 190
290 8-Apr-16 226 SELL 190
270
2-May-16 221 SELL 190
27-Jul-16 270 SELL 200
250
7-Oct-16 253 SELL 213
230 4-Nov-16 243 SELL 213
210 10-Jan-17 211 SELL 200
190 21-Feb-17 239 SELL 200
170
Rating Definitions
150
Dec-16 BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period
Oct-16
Aug-16
Apr-16
Nov-16
Jan-17
Feb-16
Sep-16
Feb-17
May-16
Jun-16
Jul-16
Mar-16
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period
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AMBUJA CEMENT : RESULTS REVIEW 4QCY16
Disclosure:
We, Ankur Kulshrestha, PGDBM & Sarfaraz Singh, PGDM authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately
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Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.
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