Orient Cement Ltd. share price target

Orient Cement (Orient) reported a better-than-expected quarter (EBITDA/t at Rs 431/t vs. estimated Rs 311/t). Ramp-up of the new Chittapur (Gulbarga) capacity (~40% utilisation) helped Orient clock 40% YoY (1.39 mTPA) volume growth in 4QFY16. Realisations remained weak (Rs 3,227/t, -17.5% YoY, -3.6% QoQ) as prices in Maharashtra and Telangana suffered.

Strong volume show boost P&L;: Orient Cement's (ORCMNT) 4QFY16 revenue grew 16% YoY (+28% QoQ) to INR4.5b, as volume increased 40% YoY to 1.4mt. Utilization rate of existing operations grew 9% YoY (+14% QoQ) to 86%, while the...

Orient Cement reported a weak quarter (EBITDA/t at Rs 199/t vs. estimated Rs 344/t). Both volumes (1.05 mT, 1.9% YoY) and realisations (Rs 3,349/t, -10.3% YoY, -4.8% QoQ) were lower than estimates because of weak demand and pricing in Maharashtra. Orient reported stable costs as benefits from lower energy, freight and RM helped absorb higher expenses from the Chittapur ramp-up (~15% utilisation in 3QFY16).

Orient Cement's Q3FY16 Revenue/EBITDA of Rs 3.5bn/Rs 208mn came ~ 14%/~ 60% lower than our & consensus estimate on account of lower than expected volume and realisation. PAT loss of Rs 131 mn was significantly below our profit estimate of Rs 237mn on account of higher depreciation and interest expenses (as the Karnataka expansion completed in Sept-2015).

Orient cement sells ~ 60% of its cement output in Maharashtra and ~ 40% in Telangana (despite the capacity share of 75%/25% in Telangana/Maharashtra). It primarily caters to trade segment (~ 80% of total sales and mostly into rural housing).

Orient Cement (Orient) reported a weak quarter (EBITDA/t at Rs 360/t vs. estimated Rs 460/t). Other expenses were sharply higher due to DMF levy (for Jan-Jun) and wage settlement for previous periods signed in the current quarter. Even after adjusting for these one-offs, the numbers would not improve, as pricing is weak in Maharashtra and Telangana, which are the companys key markets.

Orient Cement (Orient) reported a sharp decline in profitability (EBITDA/t: Rs 609, flat YoY, -35% QoQ) as prices in its key Maharashtra markets declined sharply in the quarter, while South remained stable.

Orient Cement's Q1FY16 result came lower than estimates on account of lower than expected realisation. Net sales/EBITDA at Rs 3.5bn/Rs 591mn declined 8.3%/7.7% YoY led by 10% volume de-growth. These were 10%/20% lower than our estimates as the net realisation came at Rs 3589/t (~ 7% below our estimate). Going ahead, we have cut our EBITDA estimates by 5.6%/3.4% for FY16E/17E factoring in lower realisation.

Karnataka expansion completed; production expected to start next month:The new expansion at Gulbarga, Karnataka with cement capacity of 3 mt (clinker capacity of 2 mt) is already completed. The commercial production is expected to start by next month (August 2015) after the mining clearance certificate which is pending and likely to be received by this month end. The capacity utilisation of this new plant is expected at ~ 50% for the first year and expected to gradually ramp-up.

Orient Cement (Orient) delivered a strong quarter with EBITDA/t at Rs 940 (vs est. 918), driven by strong pricing and freight rationalization. Realisations improved ~4.8% sequentially (Rs 3,913/t, inline). Volumes declined ~18% (0.99 mT), driven by weak demand. Operating costs contracted (Rs 2,974, -5.4% QoQ, 3.5% YoY) driven mainly by lower freight costs. Investment allowance on capitalized plant & machinery (Rs 919mn u/s 32 AC) allowed the co report a lower tax liability.