Ambuja Cements Ltd. share price target

We like ACEM for its healthy margin profile and cashflows. Upcoming expansion will arrest market share loss. We maintain BUY with an SOTP based TP of Rs 245 (implies EV of USD 145/MT). We value ACEM's standalone cement biz at 11x its Mar'22E EBITDA and its 50% stake in ACC at 20% holding disc. We value ACEM at 20% disc to its 5-yr mean EV/EBITDA (and in-line ACC's val) for its continued market share loss amid lack of major expansions in past. We maintain BUY on Ambuja Cements with a TP of Rs 245 (SOTP based). In 4QCY19, ACEM reported healthy volume growth and margin expansion (though EBITDA came in 7% lower vs our est). Standalone net sales/EBITDA/APAT rose 10/36/28% YoY to Rs 31.36/5.47/3.33bn resp. ACEM also closed CY19 with record high OCF.

Performance Beat on Better Volume & Cost Reduction Ambuja Cements (ACEM) has delivered a strong performance in 4QCY19, which was ahead of our estimates, mainly led by higher-than-expected sales volume and cost reduction. Reported EBITDA grew by stellar 47% YoY to Rs4.5bn (excluding Rs979mn other operation income) vs. our estimate of Rs4bn, while EBITDA/tonne stood at Rs687 vs. Rs498 and Rs707 in 4QCY18 and 3QCY19, respectively. Sales volume grew by a strong6.7% YoY to 6.54mnT (vs. our estimate of 6.3mnT), while average realisation declined by 5% QoQ (+3% YoY) to Rs4,645/tonne. A meaningful sequential reduction in operating cost/tonne to Rs3,958 (-1.4% YoY and -5.3%...

Top picks: UltraTech , JK Cement and Dalmia Bharat Another quarter of flattish sales growth: Cement demand remained flattish YoY for the third consecutive qtr, on account of continued slowdown in construction activities. We estimate the aggregate demand for the 11 cement companies under coverage (adjusted for Century Textiles vols in UltraTech) to grow a modest 2% YoY (better than the 2% decline in 1HFY20).

Ambuja (ACEM) reported weak set of Q3CY19 results with EBITDA of Rs4.4bn, 15.8% below our estimate. Key reason for the muted performance was 4.2% YoY decline in volume. Ambuja reported realization of Rs5,021/mt, up 4.9% YoY and down 1.9% QoQ. Higher exposure to North region has helped ACEM to curtail pricing decline further. Operating costs went up marginally by 1.2% YoY wherein RM costs saw a sharp decline of 27.5% YoY which was offset by increase in power & fuel costs and other expenses. EBITDA/mt came in at Rs841 vs Rs1,200 in Q2CY19, down 30%. PAT at Rs2.34bn was up 31.4% on account of low base of past year and higher other income. We have tweaked...

Ambuja Cement reported a disappointing set of Q3CY19 numbers on all fronts. Revenues for the quarter were broadly flat YoY at | 2,626 crore (below I-direct estimates of | 2,763 crore). Volumes fell 4.2% YoY to 5.23 MT on account of heavy rains and flooding in Maharashtra, Gujarat, Uttar Pradesh and Bihar (I-direct estimates: 5.55 MT). Realisations increased ~5% YoY to | 5,021/t led by improved pricing and higher sales of premium products. EBITDA margins expanded ~300 bps YoY to 16.7% (below I-direct estimates of 20.5%). While realisations grew 5% YoY, the same did not...

We recommend BUY with a SOTP based TP of Rs240. We value ACEM's standalone cement biz 11x its Jun-21E EBITDA and its 50% stake in ACC at a 20% holding disc. While ACEM's upcoming expansions would not arrest market share, robust profitability has made its valuations attractive. The stock currently trades at 10.5/9.2x its CY20/21E EBITDA and at an EV of USD 120/MT. We recommend a BUY on Ambuja Cements with a TP of Rs 240 (SOTP based). In 3QCY19, strong pricing more than offsets weak demand. Thus, standalone net sales/EBITDA/PAT rose 1/23/31% YoY to Rs 26.26/4.40/2.35bn respectively.

Volumes declined 5% YoY to 5.23mt in 3QCY19, as demand was impacted by heavy rain and floods in various states. Realizations increased 6% YoY, but were down 2% QoQ to INR4,887/t due to price roll back post May19 in core markets. Revenues grew 1% YoY to INR26.3b, vs our estimate of INR25.3b. 18 October 2019 Cost/t increased 2% YoY to INR4,180 cost/t. EBITDA/t came in at INR841 (+29% YoY). (2) Premium product sales increased 17% YoY. Volumes declined 4% YoY, while sales/EBITDA/PAT were up 0%/8%/13% YoY. For 4QCY19, we expect volumes to decline 3% YoY, but sales/EBITDA/PAT to increase 2%/34%/35% YoY. We cut our EBITDA estimate by 6% for CY19 to factor in higher reported costs. Consequently, our PAT growth estimate for the year is down by 6%. Alongside, we cut our EBITDA/PAT estimate by 12%/14% for CY20.

Given the challenging demand outlook in the medium-term, we maintain our HOLD rating on the stock with a revised target price of Rs. 215 based on roll-forward valuation multiple of 8.5x CY20E EV/EBITDA. Upbeat realisation partly offset weakness in volumes Revenue was up 3.4% YoY to Rs. 7,069cr in Q2CY19, driven by growth in premium products. Average realisation improved 8.1% YoY to Rs. 5,429/tonne while sales volumes declined 4.3% to 13.02MT due to subdued demand in northern and western regions, slow pace of construction activities and liquidity issues in the market across...

We remain NEUTRAL on Ambuja Cements (ACEM) with TP of Rs 230 (SOTP based). We maintain NEUTRAL rating with an SOTP based TP of Rs230. We value ACEMs standalone cement biz at 11x its Jun-21E EBITDA and its 50% stake in ACC at 20% holding disc. Over the past 10 years, ACEMs market share fell from 12% to 8% currently. Despite its upcoming expansions, market share recovery is unlikely, thus limiting valuation rerating.

Ambuja (ACEM) reported good set of Q2CY19 results with EBITDA of Rs6.98bn, 9.5% above ours and 18% above consensus estimates. Like ACC, key reason for the stellar numbers was higher than expected realization. Ambuja reported realization of Rs5,117/mt, up 8% YoY and 11.3% QoQ against our expectation of 8% QoQ growth. Higher exposure to North and Central region would have aided higher pricing growth. Volumes were disappointing with sharp 8.6% YoY decline against our expectation of a 4% decline. Operating costs went up by 4.2% YoY largely driven by higher raw material costs while most other cost items reported moderation. EBITDA/mt came in at Rs1,200 vs Rs727 in Q4FY19 which is the highest...