Ambuja Cements Ltd. share price target

Ambuja Cement (ACEM) reported another weak quarter, with EBITDA/t at Rs 601 (Rs 656 if Jan-Jun DMF contribution is adjusted). Realisations improved ~2.1% driven by strong pricing in the North, while prices in the East remained stable. Volume growth remained weak (2.0% YoY). Despite the increase in DMF, costs remained stable.

Ambuja's Q3CY15 performance was below our expectations on account of lower than expected realisation and higher than expected others cost. Reported EBITDA at Rs 2.9 bn came 15% lower than estimate as realisation remained flattish QoQ (against expectation of +3.5% QoQ) and higher others cost (which includes Rs 400 mn one offs related to provisions for DMF). EBITDA/t stood at Rs 656/t (down 16% YoY) against our expectat9ion of Rs 689/t.

Ambuja Cements (ACL) reported dismal and below expectation performance, mainly due to lower volume and MMDR provisioning of Rs401mn. Operating profit witnessed de-growth of ~22% yoy to Rs2.94bn below our expectation of Rs3.41bn. EBITDA/ tonne came in at Rs601 as against Rs789 and Rs615 seen in 3QCY14 and 2QCY15, respectively. Notably, operating cost/tonne was flat sequentially and declined ~4.5% yoy (the only silver lining for the quarter) largely supported by easing fuel costs. Sales volume (including clinker of 0.079mnT) grew by ~2% yoy and declined by ~18% qoq to 4.90mnT. We downgrade our earnings estimates by ~18% and ~11% for CY15E and...

Q2CY15 largely driven by lower than expected realisations. Other operating parameters were largely inline. Ambuja has once again proved its cost competitiveness by delivering the best operating cost structure across all cement...

Ambuja Cements (ACEM) reported another weak quarter, lower than estimates (EBITDA/t RS 615 vs est: 712). Volumes were flattish (6.0 mT, 1.7% YoY), rebounding from a very weak 1QCY15, when it posted a 10% decline.

Ambuja's Q2CY15 net sales was in-line with our estimate though the cement volumes came marginally higher (increased 0.8% YoY against estimate of 5% decline) and realisation a bit lower (down 8% YoY vs. expectation of -6% YoY). EBITDA/t stood at Rs 623/t (down 37% YoY) against our expectation of Rs 664/t. Going ahead, we maintain our estimates with 3.0% volume CAGR during CY14-16E and improvement in margins (EBITDA at Rs 1004/t by CY16E from Rs 837/t in CY14). Valuation at 13.7x EV/EBITDA CY16E (post factoring ACC's 50% stake) looks fair and priced in most of the positives. Maintain Sell (TP 232).

Volumes are likely to improve going forward led by demand revival on infrastructure push

Ambuja Cements reported a weak quarter, marginally missing our estimates (EBITDA/t RS 868 vs est: 904). Volumes declined ~10% YoY (5.4 mT, lowest for March qtr since CY09) underpinning a weak demand scenario. Realisations, however, were marginally higher QoQ (Rs 4,465, 2.1% QoQ, 2.6% YoY) likely driven by strong pricing in West/East.

Ambuja's Q1CY15 revenue and EBITDA were lower than our estimates on account of lower than expected cement volumes which declined sharply by ~ 12% YoY (against our estimate of ~ 4% YoY). However, realisation (+4% YoY) and total cost/ton (+7% YoY) came in-line. EBITDA/ton improved by 43% QoQ led by increase in realisation and moderation in costs.