Orient Cement Ltd. share price target

Stock under review

Leading by example (for cement industry), Orient Cement (ORCMNT) prioritised value over volume in Q1FY25. While volume plunged 15% YoY, realisation stood flat QoQ.

We change our rating from HOLD to SELL on the stock.

Q1 reported revenue declined 16% YoY to Rs 1.35mn/t, impacted by ~15% YoY fall in volumes

Q4 revenue growth subdued at 1% YoY as volumes stay flat YoY, guarding realisations a challenge

Recommendation: We maintain our HOLD rating on the stock.

Anaemic demand in Mar’24 and keener competition hurt Orient’s Q4
volume growth, while realisations rose y/y on the higher share of premium
cement.

We maintain our HOLD rating on the stock and roll over our estimates to FY26

AL: Margins continue to improve, maintain BUY. GRLM: Soft quarter on tepid demand environment. ORCMNT: Topline muted as volumes decline. PRINCPIP: Lacklustre quarter on sustained market share loss

Q3 revenue growth subdued at 3% YoY as volumes fell 3% amid state elections and festive season

Recent appreciation in the stock price leaves no upside from the CMP. Hence we change our rating from BUY to HOLD.

Q2 volumes recovered 15% YoY (-10% QoQ) to 1.4mt helped by below-normal rainfall and higher western region sales

Expansion snags due to plant relocation to hamper medium-term growth as utilisation likely breaches 80% in FY25

Orient Cement’s (ORCMNT) Q1FY24 EBITDA declined ~3%/29% YoY / QoQ to ~INR 1bn primarily due to the maintenance shutdown taken at its Chittapur kiln (in Karnataka). Despite operational bottlenecks, ORCMNT reported robust volume growth of +15% YoY to 1.59mnte (down 7.5% QoQ), while cement realisation improved 1.8% QoQ (flat YoY) led by higher sales of premium products.

Recommendation: We maintain our BUY rating on the stock.

We value the company at 6.5x its FY25E EV/EBITDA and retain our BUY rating on the stock with a TP of Rs 165/share, implying an upside of 15% from the CMP.

We roll over our estimate to FY25E and change our rating from HOLD to BUY

Orient Cement’s (ORCMNT) Q4FY23 EBITDA surged 54% QoQ to ~Rs1.4bn (though it was down 9% YoY) on the back of volumes increasing 20% QoQ (up 6% YoY) and realisation falling by a mere 0.4% QoQ (up 2.8% YoY). Improved operating leverage helped total cost/te slide 4.5% QoQ driving 29% QoQ jump in EBITDA/te to Rs812 (down 14% YoY).

Focus on realisation gains curbed Q4 volume growth at 5% YoY, indicating lacklustre demand in key areas

Orient Cement’s (ORCMNT) Q3FY23 EBITDA at ~Rs900mn (down 23% YoY) was above our / consensus estimates. Volumes were up ~17% / 16% YoY / QoQ while realisation increased 3% QoQ, and 1% YoY. Total cost/te was down 5% QoQ resulting in EBITDA/te improving sequentially to Rs632/te (I-Sec: Rs480/te) from Rs263/te.