ORMCNT, already a cost leader among mid size Indian cement cos, is evaluating WHRS additions to further reduce opex (by FY21E). ORCMNT will also do calibrated capex (all brown-field) to increase its capacity by 6 MT to 14mn MT by FY25E, across its existing locations. Robust earnings and calibrated capex should double ORCMNT's RoCE to 10% in FY19-20E (vs 5% in FY18-19) and keep its net D/E at/below 1x. The stock currently trades at attractive valuations of 6.1x FY21 EBITDA and at EV/MT of USD 61. We reiterate BUY with a TP of Rs 150 (8x FY21E EBITDA). We reiterate BUY on Orient Cement (ORCMNT) with a TP of Rs 150 (8x FY21E EBITDA). ORCMNTs stellar show continued in 1QFY20 on strong realization tailwinds amid benign input costs.

Volumes decline but pricing improves: Volumes declined 6% YoY to 1.5mt in 1QFY20. However, realizations increased 14% YoY (+11%QoQ) to INR4,552, led by strong pricing in underlying markets. Revenue grew 7.5% YoY (-8% QoQ) to INR6.8b (in-line). driving margins improvement: Cost/t increased 3% YoY (+9% QoQ) to INR3,562/t, as freight cost/t inched up 6% YoY (+8% QoQ), primarily due to higher lead distance as ORCMNT attempted to garner sales from betterrealization markets. Other expenses/t rose 12% YoY (+25%QoQ) due to operating deleverage. However, led by healthy realizations, EBITDA/t...

Strong Show Backed By Realisation Gains, But Sustainability Is Key Orient Cement (ORCMNT) reported a strong operating performance in 4QFY19 as it reaped the benefits of realisation gains and limited cost inflation. The 9% YoY strong volume growth only added to the vigour. Volume growth to 1.83mnmt (aboveour estimate of 1.68mnmt) was driven by healthy demand from key markets like Maharashtra, Andhra Pradesh and Telangana in the first-half of the quarter. Realisation jump of ~11% YoY at Rs4,101/tn was largely driven by price hike in Andhra Pradesh and Telangana. Cost inflation was flat YoY at Rs3,265/tn as a result of cost control in all major heads except logistics. Effectively, EBITDA margin jumped by 840bps YoY on a weak...

ORMCNT, already a cost leader among mid size Indian cement cos, is planning to add WHRS across its Telangana and Karnataka plants by FY21E to further drive up efficiencies. Thereafter, ORCMNT hopes to commence brown-field expansions (potentially 6 MT by FY25E, across locations). This will be calibrated in line with OCF, which translates to leverage hovering around ~1x. With better operations and calibrated capex, RoCE should double to 10% in FY19-20E (vs 5% in FY18-19). We estimate EBITDA/PAT to rebound at 29/105% CAGR during FY19-21E off a weak base, driven by pricing and cost tailwinds. Our TP jumps to Rs 140 (at an affordable 8x FY21E EBITDA). Upgrade to BUY from NEUTRAL. Key risks include weak cement pricing, higher fuel prices and reckless capex (all of which look unlikely hereon). Orient Cement (ORCMNT) becomes a conviction BUY from NEUTRAL (in our 4QFY19 preview), with a TP of Rs 140 (at a mere 8x FY21E EBITDA). A robust comeback in Q4, continued realization and cost tailwinds and calibrated capex outlook drive our rediscovered confidence.

Sector: Cement /Small Cap | Earnings Update 4QFY19 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 5.5 MTPA and captive power capacity of 95MW. The Company is primarily engaged in the manufacture and sale of Cement and its...

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