Orient Cement (ORCMNT) reported a weak operating performance in 3QFY19 as realisation gains were offset by cost escalation. Nevertheless, strong volume growth was maintained. Volume grew ~10% YoY to 1.51mnmt (below our estimate of 1.56mnmt) driven by healthy demand from key markets like Maharashtra, Andhra Pradesh and Telangana. Realisation improved in small bouts of ~1.25% YoY at Rs3,782/tn because of over-supply in southern region and tepid prices in western region. Cost escalation of ~ 2.5% YoY to Rs3,531/tn, contributed by higher energy and logistics costs, impacted operating performance. EBITDA margin fell 100bps on a weak base to 6.6% YoY. EBITDA declined ~3% to Rs379mn and EBITDA/tn further slipped by ~12% YoY to Rs251 from Rs286...

8 February 2019 Revenue grew 12% YoY (+2% QoQ) to INR5.7b and volumes increased 10% YoY to 1.51mt; both were in line with our estimates. Realizations at INR 3,782/t (+1%YoY;-1% QoQ) also came in line with our estimate due to weaker prices in underlying markets. Cost/t increased 2% YoY (-1%QoQ) to INR3531/t as freight cost/t increased 18%YoY. Power and fuel prices declined 4% YoY due to increasing AFR usage, and significantly better consumption metrics across plants, especially Chittapur. Thus, EBITDA/t stood at INR251 (-12% YoY; +3% QoQ), resulting in EBITDA of INR379m, -3%YoY (v/s our est. Margins came in at 6.6% (-1pp YoY, +0.3pp QoQ). Orient Cement reported PBT loss of INR202m (v/s loss of INR248m in 3QFY18) as against our estimate of loss at INR161m. As a result, there was a loss of INR137m (PAT) as against our estimate of INR105m loss (v/s INR177m loss in 3QFY18).

Weak Prices Limit Cost Pass-through, Impact Performance Orient Cement (ORCMNT) reported a weak operating performance in 2QFY19 as realisation declined and cost escalation continued, although the strong volume growth was maintained. Volume grew ~12% YoY to 1.47mnmt (below our estimate of 1.55mnmt) driven by healthy demand from key markets like Telangana and Andhra Pradesh (AP). Realisation, however, declined ~4.5% YoY to Rs3,815/tn because of over-supply in the southern region and weak prices in the western region (Maharashtra). Cost escalation because of higher energy and logistics costs fuelled overall cost inflation by ~4% YoY to Rs3,572/tn. With the double impact of cost inflation and realisation decline,...

6 November 2018 Revenue grew 7% YoY (-12% QoQ) to INR5.6b (in line with est.), as volumes increased 13% YoY to 1.47mt (est. Realizations were at INR 3,815/ton (-5% YoY; -4% QoQ) (v/s est. INR3,982) due to better-than-estimated prices in underlying markets. Cost/ton increased 4%YoY (+3%QoQ) to INR3,572/ton as freight cost/ton increased 5% YoY led by increase in diesel prices. Power and fuel prices increased 4% YoY due to an increase in fuel prices. Thus EBITDA/ton stood at INR243 (-58% YoY; -54% QoQ) resulting in EBITDA of INR358m, -52% YoY (est. Margins came in at 6.4% (- 7.8pp YoY, -6.

Geared For A Better Show; Valuation To Follow Performance Recovery Orient Cement's (ORCMNT) presence in growth markets of Andhra Pradesh (AP) and Telangana in a most cost-effective manner (because of close proximity to key inputs) will strongly guard its earnings, despite the slow and steady price recovery. It is focused on further improving the efficiency at its new plant operating in Chittapur by adding the railway siding (benefits of cost savings of ~ Rs150/tn effective 2HFY19) and the setting up of waste heat recovery system or WHRS (by FY20-end) will further improve the efficiency. ORCMNT targets north Karnataka and south Maharashtra through this plant. We expect its presence in strong markets to provide volume delta...

Sector: Cement /Small Cap | Earnings Update 1QFY19 Background: Orient Cement, a CK Birla group company, formed in 2012 following the demerger from Orient Paper and Industries ltd, is a mid-sized south based cement manufacturer. The company emerged as one of the fastest growing and leading cement manufacturer in India with a capacity of 8 MTPA with clinker manufacturing capacity ~6 MTPA and captive power capacity of 50MW. The Company is primarily engaged in the manufacture and sale of Cement and its...

1 August 2018 Revenue grew 12.7% YoY (+3% QoQ) to INR6.4b (est. of INR5.7b) in 1QFY19, as volumes increased 15% YoY to 1.6mt (est. Volume growth was on account of low base and healthy demand from underlying markets of Telangana and Maharashtra. Realizations stood at INR3,992/ton (+8% QoQ) versus our estimate of INR3,866/ton due to better-than-estimated prices in Maharashtra as also impact of higher FOR sales. Cost/t increased 6% QoQ (+7% YoY) to INR3,459 due to 10%QoQ increase in P&F; cost (unavailability of domestic coal leading to sourcing of higher cost alternatives). Freight cost/t increased 10% QoQ to due to higher diesel prices as also higher FOR sales. However, EBITDA/t stood at INR533 (-36% YoY, +20% QoQ; est. of INR498), resulting in EBITDA of INR854m (-27% YoY, +15% QoQ) versus our estimate of INR737m due to better than estimated realizations.

Strong cost control QoQ offset impact of lower volume YoY Orient Cement (ORCMNT) posted flattish EBITDA YoY in Q4FY18, as increased competition drove volume decline YoY, and aggressive pricing led to weak NSR QoQ. Lower opex QoQ moderated YoY cost inflation. The JPA's assets acquisition is getting delayed owing to pending approvals. We remain wary of this inorganic acquisition which will keep leverage high, and return ratios subdued. We maintain HOLD with TP of Rs150. Volume declined 3% YoY, market share loss continues: Sales volume recovered 23% QoQ to 1.68mn MT, but still fell 3% YoY. Utilisation stood at 84% (vs 87% YoY and 69% QoQ)....

Cost/t declined 6% QoQ (+8% YoY) to INR3,2 51 due to positive operating leverage and lower P&F cost (better efficiency parameters). Freight cost/t increased 6% QoQ to INR1,055 due to higher diesel prices. Thus, EBITDA/t stood at INR445 (+2% YoY, +56% QoQ; est. of INR244), resulting in EBITDA of INR746m (-1% YoY, +91% QoQ) versus our estimate of INR440m. ORCMNT reported PBT of INR182m and PAT of INR128m (-23% YoY; est. of a loss of INR38m).

Sector: Cement /Small Cap | Earnings Update 3QFY18 Background: Orient Cement, a CK Birla group company, formed in 2012 following the demerger from Orient Paper and Industries ltd, is a mid-sized south based cement manufacturer. The company emerged as one of the fastest growing and leading cement manufacturer in India with a capacity of 8 MTPA with clinker manufacturing capacity ~6 MTPA and captive power capacity of 50MW. The Company is primarily engaged in the manufacture and sale of Cement and its...

Maintain NEUTRAL with a TP of Rs 138 (8.5x Dec-19 EV/EBITDA, US$80/T). Orient Cements numbers were below estimates (EBITDA/T Rs 286, (21.4)/(49.9)% YoY/QoQ) owing to lower realisations (Rs 3,737, (6.5)% QoQ). Volumes grew 9.3% YoY to 1.37 mT. However, other costs jumped 19% sequentially to Rs 700/t, as the company incurred non-recurring maintenance costs.

Orient Cement's Q3FY18 operating performance disappointed, with EBITDA at Rs391mn against estimated Rs772mn and OPM at 7.6% against estimated 14.5%, led by lower realization and higher Repair & Maintenance costs (impact of Rs100-120mn). Sales volume was up 9.3% yoy at 1.37mt with capacity utilization of 68.5% (62.6% in Q3FY17). Realization grew by 2.5% yoy (down 6.5% qoq), supported by change in billing...

Background: Orient Cement, a CK Birla group company, formed in 2012 following the demerger from Orient Paper and Industries ltd, is a mid-sized south based cement manufacturer. The company emerged as one of the fastest growing and leading cement manufacturer in India with a capacity of 8 MTPA with clinker manufacturing capacity ~6 MTPA and captive power capacity of 50MW. The Company is primarily engaged in the manufacture and sale of Cement and its...

Maintain NEUTRAL, with an unchanged TP of Rs 165 (8.5x Sep-19 EV/EBITDA, USD86/T). Orient Cements numbers were below estimates (EBITDA/T: Rs570, 4.2x/ (31.8) % YoY/QoQ). Volumes grew 11.5% YoY (1.31 mT), while realisations were flattish (Rs 3,996/T, 22.1/ (1.7) % YoY/QoQ). However, freight costs jumped ~8.5% sequentially owing to higher lead distance, as Orient sold in distant markets, chasing growth. The miss on EBITDA (Rs746mn, 4.6x/ (3.62) % YoY/QoQ) was lower owing to higher-than-estimated volumes

YoY margin improvement led by better realizations: The sharp YoY margin improvement of 10pp to 14.3% was led by improved pricing in its focus markets of west and south. This was partially offset by higher cost/t (+9% YoY to INR3,426/t). Hence, EBITDA/t increased 303% YoY to INR570/t (-32% QoQ due to a seasonally weak quarter). Power & fuel cost/t declined 4% YoY due to higher usage of domestic coal. Freight cost/t increased 43% YoY due to a shift in invoicing toward FOR terms and an increase in lead distance. Hence, EBITDA increased 350% YoY (-36% QoQ) to INR746m (est. of...

Our TP of Rs 165 values Orient at 8.5x FY19 earnings (US$84/t). Orient Cement reported strong numbers (EBITDA: Rs 1.17bn, Est: Rs 1.06bn, 3x YoY, 54.7% QoQ), as realisations surprised (Rs 4,064/t, 30.0% YoY, 18.0% QoQ, Est- 8.0% QoQ). Part of this may have been owing to the shift in invoicing to FOR (free on rail) terms, as reflected in the higher freight numbers (Rs 996/t, 43.2%, YoY 12.4% QoQ). Despite this, the improvement in pricing is better than expected, as is evident from ex-freight realisations (Rs 3,068, 26.2% YoY, 20.0% QoQ, Est 2,823/t).

1QFY18 revenue increased 30% YoY (-5% QoQ) to INR5.68b (est. of INR5.92b), as volume growth was flat YoY at 1.40mt (est. of 1.6mt) on account of destocking ahead of GST roll-out. Realizations increased 18% QoQ (+30% YoY) to INR4,065/t (est. of INR3,693) due to sharp pricing improvement in AP/Telangana and also Maharashtra (~84% of sales volume). Realization improvement looks sequentially overstated by ~INR100/t due to lesser proportion of ex-factory sales in 1QFY18. Favorable pricing improves margins:...

Orient Cements numbers beat our estimates (EBITDA: Rs 755mn, Est: Rs 606mn, 22.3% YoY, 65.9% QoQ) as volumes surprised (1.73 mT, 25% YoY vs expectations of flattish growth). However, EBITDA/t (Rs 436, -2.2% YoY, 19.9% QoQ) was inline (Est Rs 407/t) as realisations weakened (Rs 3,443, 9.6% YoY, -5.6% QoQ), given the volume push. At implied utilisations of 87%, 4QY17 is a relevant base for production costs (Total op. costs Rs 3,007/t), one of the lowest in the industry.

YoY) to INR3,007 (est. of INR3,146), led by (a) lower RM cost as there was no sourcing of clinker from third parties in 4QFY17, (b) decline of 2% QoQ in power/fuel cost on improved power consumption at the Chitapur unit and higher proportion of petcoke used, (c) fall of 3% QoQ in freight cost/t due to freight optimization measures. EBITDA thus rose 22% YoY (+66% QoQ) to INR755m (est. of INR813m), with the margin at 12.7% (14.2% in 4QFY16)....