Religare Investment Call

Transcription

1 Oct-17 v-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 BUY CMP (Rs) 190 Target Price (Rs) 247 Potential Upside 29.7% Sensex 33,349 Nifty 10,030 Key Stock data BSE Code NSE Code Bloomberg AMBUJA CEM ACEM:IN Shares o/s, Cr (FV 1) Market Cap (Rs Cr) 37,817 3M Avg Volume 37,52, week H/L 289/189 Shareholding Pattern (%) Mar-18 Jun-18 Sep-18 Promoter FII DII Others Year relative price performance Research Analyst ACL Nifty 50 Mehernosh Panthaki, CA Mehernosh.panthaki@religare.com Revenue growth intact, but margins disappoint Ambuja Cements Ltd (ACL) reported subdued numbers for Q3CY18. While revenue growth at 12.7% YoY was in line with our estimates, the company disappointed on the profit front with a marginal 1.1% growth in EBITDA and 34.4% YoY decline in PAT. EBITDA margins contracted 158bps YoY to 13.7%, impacted by higher power & fuel and freight cost. However, notwithstanding 1-2 quarters of muted growth, we remain positive on ACL s long term growth prospects, given the anticipated revival in the cement demand and company s efforts towards brand building & distribution expansion. We maintain Buy on the stock with revised target price of Rs 247. Q3CY18 Result Update: Net Revenue (standalone) grew by 12.7% YoY to Rs 2,613.9cr, led by healthy volume growth of 9% (at 5.5 MT) and decent improvement in realizations. Healthy demand environment in the company s key markets resulted in good volume offtake, while increasing sales of premium products (Compocem, Roof Special and Cool Walls) kept the realizations healthy. The cement capacity utilization stood at 74% during the quarter, compared to 68% in Q3CY17. EBITDA grew marginally by 1.1% YoY to Rs 358.2cr, while EBITDA margins contracted 158bps YoY to 13.7%, impacted by higher power & fuel (+13.1%), freight cost (+19.1% due to rise in diesel prices) and other expenses (+15.1%). Lower other income (down 68.5% YoY on the back of absence of dividend income from its subsidiary ACC) and a sharp rise in the effective tax rate (+1001bps to 28.9%) impacted the PAT, which de-grew 34.4% YoY to Rs 178.6cr. Other key highlights: i) ACL is looking to set up a 3.1 MTPA (9,500 TPD) clinkerisation plant at Marwar Mundwa in Rajasthan. An initial investment of Rs.1,391cr towards the first phase of 1.7 MTPA (5000 TPD) capacity has been approved and is expected to commission in H2CY20. This would increase the total installed capacity to 31.4 MTPA, thus resulting in improved volume growth visibility over long term; ii) Focus would remain on steadily increasing sale of premium products going forward. Outlook & Valuation Led by anticipated revival in demand (especially in rth & West) and company s efforts towards brand building & distribution expansion, ACL s standalone net revenue, EBITDA and PAT are estimated to grow by 10%, 8.9% & 8.8% CAGR respectively over CY17-19E. Volume offtake is likely to remain healthy. Further, increasing sale of fast growing premium products would result in better realizations going forward. Moreover, the commencement of new clinkerisation facility in Rajasthan (from H2CY20) would wane out the ongoing concerns over capacity constraints and provide volume growth visibility over long term. While rising power & fuel prices and increasing freight cost will continue to put pressure on the margins in the near term, we expect the same to be offset by cost efficiency measures going ahead. We estimate a meaningful margin improvement in CY19E. Leverage free balance sheet, healthy cash flows and healthy dividend pay-outs should provide valuation comfort. Based on poor performance on the profit front, we have downgraded our EBITDA and PAT estimates by 5-11% for CY18 & CY19. We maintain Buy on the stock with revised target price of Rs 247. Financial Summary standalone Particulars, Rs cr CY16 CY17 CY18E CY19E Net Revenue 9, , , ,612.8 EBITDA 1, , , ,295.5 EBITDAM (%) APAT , , ,469.3 APATM (%) EPS (Rs) ROE (%) EV/EBITDA (x) October 29, 2018

2 P&L Account - standalone Particulars (cr) Q3CY18 Q3CY17 Y-o-Y % Q2CY18 Q-o-Q % Net Revenue 2, , , Raw Material Consumed Stock Adjustment (78.4) Purchase of Finished Goods Total Material Cost Gross Profit 2, , , Employee Expenses Other Expenses 1, , , EBITDA EBITDAM (%) bps bps Depreciation EBIT Other Income Interest PBT Tax Tax Rate (% on PBT) ,001bps bps PAT PATM (%) bps bps EPS

3 P&L Account - standalone Net Revenue 9, , , ,612.8 Growth (%) (2.8) Material Expenses Employee Expenses Other Operating Expenses 6, , , ,665.0 EBITDA 1, , , ,295.5 EBITDAM (%) EBITDA Growth (%) Depreciation EBIT , , ,702.8 Other Income Interest PBT 1, , , ,012.7 Tax PAT , , ,469.3 PAT Growth (%) (0.6) 18.3 EPS EPS Growth (%) (9.8) 34.0 (0.6) 18.3 Balance sheet - standalone SOURCES OF FUNDS Share Capital Reserves 18, , , ,321.7 Total Shareholders Funds 19, , , ,718.8 Total Debt Net Deferred Taxes Long Term Provisions & Oth TOTAL SOURCES OF FUNDS 19, , , ,252.2 APPLICATION OF FUNDS Net Block 5, , , ,170.9 CWIP Investments 11, , , ,844.7 LT Loans & Advances and Oth- 1, , , ,400.2 Total n-current Assets 19, , , ,315.8 Inventories , , ,252.6 Trade Receivables Cash & Equivalents 2, , , ,350.3 ST Loans & Advances and Oth Total Current Assets 4, , , ,766.2 Trade Payables , , ,140.3 Other Current Liabilities & 2, , , ,689.5 Total Current Liabilities 3, , , ,829.8 Net current Assets , , ,936.4 TOTAL APPLICATION OF 19, , , ,252.2

4 Cash Flow statement - standalone Reported PBT 1, , , ,012.7 n-operating & EO items Interest Expenses Depreciation Working Capital Change Tax Paid OPERATING CASH FLOW ( a ) 1, , , ,038.0 Capex 5,553.5 (428.2) (502.1) (600.0) Free Cash Flow 7, , , ,438.0 Investments (9,618.6) n-operating income Others (32.5) 89.0 (118.6) (135.3) INVESTING CASH FLOW ( b ) (3,725.8) (62.1) (368.1) (449.4) Debt Issuance / (Repaid) (7.0) 8.4 (1.2) (1.1) Interest Expenses (74.2) (107.2) (85.9) (81.6) FCFE 7, , , ,355.2 Dividend (667.2) (857.8) (953.1) (1,012.7) Others (64.8) (41.0) FINANCING CASH FLOW ( c ) (726.4) (997.5) (1,030.0) (1,082.6) EO items NET CASH FLOW (a+b+c) (2,817.2) Closing Cash 2, , , ,350.3 Key Financial ratios - standalone PROFITABILITY (%) GPM EBITDAM APATM RoE RoCE EFFICIENCY Tax Rate (%) Fixed Asset Turnover (x) Cash Conversion Cycle (days) Debt/Equity (x) Interest Coverage (x) PER SHARE DATA EPS CEPS BV Dividend VALUATION P/E (x) P/BV (x) EV/EBITDA (x) Dividend Yield (%)

5 Before you use this research report, please ensure to go through the disclosure inter-alia as required under Securities and Exchange Board of India (Research Analysts) Regulations, 2014 and Research Disclaimer at the following link : Specific analyst(s) specific disclosure(s) inter-alia as required under Securities and Exchange Board of India (Research Analysts) Regulations, 2014 is/are as under: Statements on ownership and material conflicts of interest, compensation Research Analyst (RA) [Please note that only in case of multiple RAs, if in the event answers differ inter-se between the RAs, then RA specific answer with respect to questions under F (a) to F(j) below, are given separately] S.. Statement Answer Tick appropriate I/we or any of my/our relative has any financial interest in the subject company? [If answer is yes, nature of Interest is given below this table] I/we or any of my/our relatives, have actual/beneficial ownership of one per cent. or more securities of the subject company, at the end of the month immediately preceding the date of publication of the research report or date of the public appearance? Yes I / we or any of my/our relative, has any other material conflict of interest at the time of publication of the research report or at the time of public appearance? I/we have received any compensation from the subject company in the past twelve months? I/we have managed or co-managed public offering of securities for the subject company in the past twelve months? I/we have received any compensation for brokerage services from the subject company in the past twelve months? I/we have received any compensation for products or services other than brokerage services from the subject company in the past twelve months? I/we have received any compensation or other benefits from the subject company or third party in connection with the research report? I/we have served as an officer, director or employee of the subject company? I/we have been engaged in market making activity for the subject company? Nature of Interest ( if answer to F (a) above is Yes : Name(s) with Signature(s) of RA(s). [Please note that only in case of multiple RAs and if the answers differ inter-se between the RAs, then RA specific answer with respect to questions under F (a) to F(j) above, are given below] Copyright in this document vests exclusively with RBL. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose, without prior written permission from RBL. We do not guarantee the integrity of any s or attached files and are not responsible for any changes made to them by any other person. Research Disclaimer: