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Morningstar
Ambuja Cements (Hold)
CMP: ₹227.45
Fair value: ₹262
Investors should greet Ambuja Cements’ September quarter results with enthusiasm as Ambuja has beaten our profit estimates and stays on course to meet our full year profit estimates. While aggregate cement volumes grew by 0.3 per cent, 6 per cent lower versus our estimates; blended realisations increased by 9 per cent over prior year and resulted in a 9 per cent increase in net sales for the company. Ambuja surprised us positively with the adjusted operating profit margins of 15.7 per cent versus 12.3 per cent in the prior year and our estimate of 14 per cent. The beat was largely driven by gains from reduction in inventories.
However, the effect of increase in the prices for pet coke, railway freight and diesel was visible in 12 per cent increase in the cost of raw material, power, fuel and freight. On brand level, standalone adjusted operating profit margin of 18 per cent versus our estimate of 16.1 per cent reflected strong operational efficiency offsetting weaker profitability from ACC. We do not see any material change to our long term forecasts.
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