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Reliance Securities
Ambuja Cements (Buy)
CMP: ₹206.85
Target: ₹242
Ambuja Cements has reported a weak performance in 4QCY18, mainly marred by sharp increase in power and fuel expenditures and subdued realisation. EBITDA declined by a sharp 31 per cent y-o-y to ₹310 crore significantly missing our estimate of ₹490 crore led by ₹69/tonne decline in average realisation versus our estimates, and higher-than-estimated operating cost/tonne by ₹227/tonne. EBITDA/tonne stood at mere ₹498 as against ₹750 and ₹485 in 4QCY17 and 3QCY18, respectively.
Sales volume grew by 4.4 per cent y-o-y to 6.13 million tonne in 4QCY18. Operating cost/tonne stood at ₹4,012 (+8.4 per cent y-o-y and -2.4 per cent q-o-q) mainly impacted by about 17 per cent y-o-y increase in input cost/tonne to ₹1,502.
We believe recent recovery in realisation in its key Western markets is likely to aid its operational performance from the current quarter onwards. Trimming down our EBITDA estimate by 6.5 per cent/6 per cent for CY19E/CY20E to factor in soft realisation and higher input cost, and rolling over our estimates to CY20E, we maintain our ‘buy’ recommendation on the stock with a revised target price of ₹242 (from ₹235 earlier).
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