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Geojit BNP
Ambuja Cements (Buy)
CMP: ₹219.45
Target: ₹272
Ambuja Cements, part of the global conglomerate Lafarge Holcim, is engaged in manufacturing and marketing cement and clinker. The company’s cement capacity stands at about 30 million tonnes.
Standalone sales in Q3CY16 fell 4.2 per cent y-o-y (down 0.7 per cent in 9MCY16). While, volumes fell 6.6 per cent y-o-y, realisation improved by 2.5 per cent in Q3CY16.
EBITDA/tonne remained flat y-o-y at ₹613/tonne, mainly impacted by higher freight costs (up 4 per cent y-o-y). PAT grew by robust 80 per cent y-o-y due to dividend income of ₹103 cr from ACC.
Steady cement prices in northern India, coupled with improving demand, augurs well for Ambuja Cements. We expect sales to grow at around 8 per cent CAGR over CY15-17E.
We factor EBITDA margin growth of 340 bps to 19.6 per cent in CY17E, led by improvement in realisation and operational efficiency. However, rising pet coke price remains a key monitorable.
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