Ambuja Cements Ltd.static-news.moneycontrol.com/static-mcnews/2017/10/...Page 5 Source: Company,...

Ambuja Cements Ltd.

RESULT UPDATE 25th October, 2017

2 Page

Result Highlights:

• Net sales stood at INR 23196 mn as against our estimate of INR 20400 mn which was up by 15.1% y-o-y and down 18.9% q-o-q. Cement sales volumes grew by 11.6% y-o-y reaching 5.02 MT as against 4.5 MT in Q3CY16 and 6.05 MT in Q2CY17. Realizations increased by 3.20% y-o-y and remained flattish on q-o-q basis.

• EBIDTA stood at INR 3544 mn which was up by 15.1% y-o-y and down 45.6% q-o-q while EBIDTA margin stood at 15.3% as against 22.8% in Q2CY17 and 15.3% same quarter last year. EBITDA was primarily above our estimates on account of higher than anticipated realizations. PAT stood at INR 2724 mn which was up by 10% y-o-y and down 30.5% q-o-q while PAT Margin stood at 11.7%. Net profit was above our expectation(est. of INR 1435 mn) owing to higher other income which stood at INR 1531 mn vs. our estimates of INR 500 mn.

Ambuja Cements Ltd. Outperforming volume growth !

CMP

INR 283 Target

INR 302 Potential Upside

6.7% Market Cap (INR mn)

560,448 Recommendation

ACCUMULATE Sector

Cement

SHARE PRICE PERFORMANCE

Shares outs (mn) 1986

EquityCap (INR mn) 3971

Mkt Cap (INR mn) 560448

52 Wk H/L (INR) 291/191

Volume Avg (3m K) 2073.1

Face Value (INR) 2

Bloomberg Code ACEM IN

MARKET DATA

SENSEX 33043

NIFTY 10295

MARKET INFO

Robust volume growth during the quarter:

Volumes for Ambuja Cements Ltd (ACEM) during the quarter stood at 5.02 MT growing by 11.6% y-o-y. Volumes stood 6.6% higher than our estimates of 4.73 MT. We believe that the volume growth was robust despite adverse rainfalls in Western region and sand availability issues in certain pockets of Northern region (ACEM derives 40%/35% of its volumes from North/West). Consequently, top-line for the company rose by 15.1% y-o-y scaling to INR 23196 mn; which was 13.7% above our estimates of INR 20400 mn

On the demand outlook, we believe that increasing infrastructure spends by the Government in the western region, higher investments in development of expressways coupled with take-off in affordable housing projects in North(shortage of 6.6 mn units in urban and rural areas) will act as the key positive triggers for the company.

We expect the cement volumes for the company to grow from 21.47 MT in CY16 to 25.70 MT in CY18 translating into 9.42% CAGR while we estimate total revenues to surge by 14.62% from INR 105381.5 mn in CY16 to INR 138437.6 mn in CY18.

Operating profit beats estimates owing to strong realizations: In Q3CY17, EBITDA for the company stood at INR 3544 mn while EBITDA/ton stood at INR 706. Operating profits stood higher than our estimates of INR 3150 mn owing to strong realizations which grew by 3.2% y-o-y as against our expectations of a de-growth of 4% y-o-y. However, total cost of production/ton rose from INR 3793 in Q3CY16 to INR 3915 in Q3CY17 on account of higher COGS and freight costs. Going ahead, we expect the realizations for the company to remain sturdy and factor in a 5% CAGR hike over CY16-CY18. In addition to this, we believe that higher operating leverage will result into better EBITDA margins for the company. We expect EBITDA/ton for the company to surge from INR 734 in CY16 to INR 1050 by CY18 and EBITDA to grow at 29.4% CAGR from INR 16826.9 mn to INR 28174.5 mn over CY16-CY18. Valuation and Outlook:

We expect revenue/EBITDA/PAT to grow at 14.62%/29.4%/35% CAGR over CY16-CY18. With expected net cash and cash equivalents of INR 43370 mn by CY18, the company trades at an EV/ton of $192 and EV/EBITDA of 13.54x on CY18 basis (standalone value). Although, the growth prospects for the company appear robust; we believe that valuations remain rich leaving little scope for further upside. We value Ambuja Cement Ltd on SOTP methodology (EV/EBITDA of 14x and EV/ton of $180 for standalone business on CY18E + 20% Holding company discount in ACC stake on CY18E) and arrive at a target price of INR 302 which is an upside of 6.7% from CMP of INR 283. We maintain our ACCUMULATE rating for the stock.

Particulars Sep 17 Jun 17 Mar 17

Promoters 63.11 63.11 63.11

FIIs 16.47 16.75 18.21

DIIs 12.12 11.48 10.69

Others 8.31 8.67 8

Total 100 100 100

SHARE HOLDING PATTERN (%)

Volume CAGR expected between CY16 and CY18

9.42%

EBITDA CAGR expected between CY16 and CY18

29.4%

India Equity Institutional Research II Result Update - Q3CY17 II 25th October, 2017

80

105

130

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Ap

r-15

Oct

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Sensex Ambuja Cement

+91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com

KRChoksey Research is also available on Bloomberg KRCS<GO>

Thomson Reuters, Factset and Capital IQ

ANALYST Vaibhav Chowdhry, [email protected], +91-22-6696 5571 Kunal Shah, [email protected], +91-22-6696 5607

Q3CY17 Result Snapshot

Particulars (mn) Q3CY17 Q2CY17 Q3CY16 Q-o-Q Y-o-Y

Net Sales 23196 28600 20149 -18.9% 15.1%

Total Expenditure 19653 22090 17068 -11.0% 15.1%

Cost of Raw Materials 2709 2289 1311 18.3% 106.6%

Employee Cost 1613 1697 1378 -4.9% 17.1%

Power and Fuel Costs 4860 5647 4374 -13.9% 11.1%

Transportation costs 6118 7375 5376 -17.0% 13.8%

Other expenses 4353 5084 4630 -14.4% -6.0%

PBIDT (Excl OI) 3544 6510 3080 -45.6% 15.1%

EBITDA Margins (%) 15.28% 22.8% 15.29% -748bps -1bps

Depreciation 1403 1439 1592 -2.5% -11.8%

EBIT before Exceptional Item 2141 5071 1488 -57.8% 43.8%

Exceptional Items 0 0 0 - -

Other Income 1531 560 1736 173.5% -11.8%

EBIT 3672 5631 3224 -34.8% 13.9%

Interest 313 165 198 89.4% 58.0%

EBT 3359 5466 3026 -38.5% 11.0%

Tax 635 1544 551 -58.9% 15.3%

PAT 2724 3922 2476 -30.5% 10.0%

PAT Margin (%) 11.7% 13.7% 12.29% -197bps -54bps

EPS 1.37 1.98 1.25 -30.5% 10.0%

3 Page

Source: Company, KRChoksey Research


Ambuja Cements Ltd.

Particulars (INR mn) CY14 CY15 CY16 CY17E CY18E

Revenues 112375.60 107639.60 105381.50 119104.63 138437.60

EBITDA 19284.40 15314.70 16826.90 20713.05 28174.54

PAT 14963.60 8075.60 9700.90 12852.64 17677.80

EPS 9.66 5.20 4.89 6.47 8.90

P/E (x) 23.69 39.07 42.21 43.57 31.68

EV/EBITDA (x) 16.05 17.38 22.88 18.83 13.54


Key Financials





Standalone Financials

Balance Sheet (INR mn) CY14 CY15 CY16 CY17E CY18E

Equity Share Capital 3099.50 3103.80 3971.30 3971.30 3971.30

Reserves 97933.80 99964.90 186764.30 193190.62 200261.74

Net worth 101033.30 103068.70 190735.60 197161.92 204233.04

Total loans 291.50 327.40 368.10 368.10 368.10

Capital Employed 107633 109358 196433 203001 210157

Net block 69172.80 65061.50 62986.70 58936.50 57746.74

Current Investments 20670.00 21192.30 10650.20 10650.20 10650.20

Inventories 8883.90 8954.50 9375.40 10348.60 11176.49

Sundry debtors 2279.80 2863.60 3000.80 3263.14 3792.81

Sundry creditors 6184.90 6798.20 8969.80 9898.66 10933.52

Cash and bank 24581.20 28483.90 14128.70 24461.83 33087.93

Total Current assets 59952.10 65486.00 41089.50 52774.41 63338.06

Total Current liabilities 31375.40 32260.90 36109.70 37176.46 39393.76

Capital Deployed 107633 109358 196433 203001 210157

4 Page

Profit & Loss (INR mn) CY14 CY15 CY16 CY17E CY18E

Total Sales 112375.60 107639.60 105381.5 119104.63 138437.60

COGS 8507.90 8267.00 7464.9 8211.39 8868.30

Employee Expenses 5815.80 5895.20 5937.2 6530.92 7184.01

Power and fuel 22652.20 20529.40 18319.6 21983.52 25281.05

Transportation cost 24388.90 25096.80 24728.4 27394.06 30456.27

Other Expenses 19132.00 19510.90 19401.2 20247.79 22150.02

Excise duty 12594.40 13025.60 12703.3 14023.90 16323.41

EBITDA 19284.40 15314.70 16826.9 20713.05 28174.54

D&A 5095.30 6256.60 8501.3 5850.00 6189.76

Other income 4289.80 3581.90 5762.3 5000.00 5000.00

EBIT 18478.90 12640.00 14087.9 19863.05 26984.78

Interest Expense 644.80 917.90 714.8 680.00 600.00

PBT 17834.10 11722.10 13373.1 19183.05 26384.78

Tax 2870.50 3646.50 3672.2 6330.41 8706.98

Effective tax rate 16.10% 31.11% 27.46% 33.00% 33.00%

PAT 14963.60 8075.60 9700.9 12852.64 17677.80

Cash Flow (INR mn) CY14 CY15 CY16 CY17E CY18E

PAT 14963.60 8075.60 9700.90 12852.64 17677.80

Depreciation & Amortization 5095.30 6256.60 8501.30 5850.00 6189.76

(Incr)/Decr in Working Capital 147.80 227.90 357.70 -143.39 365.22

Cash Flow from Operating 16752.70 15528.10 14153.90 19239.25 24832.78

(Incr)/ Decr in Gross PP&E -8234.10 -6213.80 -3910.50 -1799.80 -5000.00

Cash Flow from Investing -4600.90 -829.20 -34026.00 -1799.80 -5000.00

(Decr)/Incr in Debt 0.00 35.90 141.30 0.00 0.00

Dividend -6173.00 -7443.50 -5511.10 -6426.32 -10606.68

Finance costs -318.30 -389.30 -359.20 -680.00 -600.00

Cash Flow from Financing -7171.40 -8968.90 -6822.60 -7106.32 -11206.68

Incr/(Decr) in Balance Sheet Cash 4980.40 5730.00 -26694.70 10333.13 8626.10

Cash and cash equivalents at the Start of the Year 39606.60 44587.00 50317.00 14128.70 24461.83

Cash and cash equivalents at the End of the Year 44587.00 50317.00 23622.30 24461.83 33087.93





Ambuja Cements Ltd.





5 Page


Ratio Analysis CY14 CY15 CY16 CY17E CY18E

EBITDA/ton 840.19 660.71 733.71 841.51 1049.39

Volume (mn tons) 21.46 21.50 21.10 23.19 25.70

Growth (%)

Total Sales 8.15% -4.21% -2.10% 13.02% 16.23%

EBITDA 15.69% -20.59% 9.87% 23.09% 36.02%

PAT 15.59% -46.03% 20.13% 32.49% 37.54%

Profitability (%)

EBITDA Margin 17.16% 14.23% 15.97% 17.39% 20.35%

NPM 13.32% 7.50% 9.21% 10.79% 12.77%

Return ratios

ROE 14.81% 7.84% 5.09% 6.52% 8.66%

ROCE 17.17% 11.56% 7.17% 9.78% 12.84%

Per share data

EPS 9.66 5.20 4.89 6.47 8.90

BPS 65.19 66.41 96.05 99.29 102.85

Valuations (x)

P/E (x) 23.69 39.07 42.21 43.57 31.68

P/BV (x) 3.51 3.06 2.15 2.84 2.74

EV/EBITDA (x) 16.05 17.38 22.88 25.36 18.34

EV/Ton ($) 160.66 133.98 193.82 264.39 260.05

Net Debt/EBITDA -2.33 -3.22 -1.45 -1.68 -1.54

Net Debt/Equity -0.44 -0.48 -0.13 -0.18 -0.21

Interest Coverage 28.66 13.77 19.71 29.21 44.97


Ambuja Cements Ltd.

Particulars (in INR) CY14 CY15 CY16 CY17E CY18E

Realization/ton 4474.36 4303.31 4266.60 4479.93 4703.93

COGS cost/ton 384.10 379.74 347.69 354.12 345.00

Employee cost/ton 262.56 270.79 276.53 281.65 279.48

Power and fuel cost/ton 1022.67 943.01 853.27 948.06 983.51

Transportation and Handling cost/ton 1101.08 1152.82 1151.77 1181.39 1184.84

Other Expenses/ton 863.75 896.23 903.64 873.20 861.70

EBITDA/ton 840.19 660.71 733.71 841.51 1049.39


Operating metrics





6 Page

Ambuja Cements Ltd.


Ambuja Cements Ltd

Date CMP (INR) TP (INR) Recommendation

25-Oct-17 283 302 ACCUMULATE

25-Jul-17 268 282 ACCUMULATE

02-May-17 246 248 HOLD

Rating Legend

Our Rating Upside

Buy More than 15%

Accumulate 5% - 15%

Hold 0 – 5%

Reduce -5% – 0

Sell Less than -5%

ANALYST CERTIFICATION:

We, Vaibhav Chowdhry (B.Com, MBA), research analyst and Kunal Shah (BE), Senior research associate, author and the name subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect my views about the subject issuer(s) or securities. I also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

Terms & Conditions and other disclosures:

KRChoksey Shares and Securities Pvt. Ltd (hereinafter referred to as KRCSSPL) is a registered member of National Stock Exchange of India Limited, Bombay Stock Exchange Limited and MCX Stock Exchange Limited. KRCSSPL is a registered Research Entity vides SEBI Registration No. INH000001295 under SEBI (Research Analyst) Regulations, 2014.

We submit that no material disciplinary action has been taken on KRCSSPL and its associates (Group Companies) by any Regulatory Authority impacting Equity Research Analysis activities.

KRCSSPL prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analyst covers.

The information and opinions in this report have been prepared by KRCSSPL and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of KRCSSPL. While we would endeavor to update the information herein on a reasonable basis, KRCSSPL is not under any obligation to update the information. Also, there may be regulatory, compliance or other reasons that may prevent KRCSSPL from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or KRCSSPL policies, in circumstances where KRCSSPL might be acting in an advisory capacity to this company, or in certain other circumstances.

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It is confirmed that, Vaibhav Chowdhry (B.Com, MBA), research analyst and Kunal Shah (BE), Senior research associate, of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific brokerage service transactions.

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Ambuja Cements Ltd.static-news.moneycontrol.com/static-mcnews/2017/10/...Page 5 Source: Company,...

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