Ambuja Cements (ACEM), third largest cement company in India Q2CY21 EBITDA came in 19%/ 22% higher than our/ consensus estimate. Beat is driven by the volume and lower opex/t (particularly raw material, employee). We were factoring volume of -20% QoQ vs -10% reported by ACEM. Led by QoQ increase in the realization, ACEM reported EBITDA/t of Rs 1,495 versus. Rs 1,362 QoQ, said IDBI Capital in its report.
ACEM has announced capex of 1.5mt GU in Punjab and re-iterated its plan to commission Marwar plant by Q3CY21 which could give incremental cement capacity of ~5mtpa. This will increase ACEM cement capacity by 17% by CY21E.
Commenting on the result review, IDBI Capital said, "We have factored better than estimated result in CY21/CY22 and increase the EBITDA by 6%/ 7%. Our revised TP stands at Rs 347 (earlier Rs 292), valuing standalone business at 13x CY22E EV/EBITDA (vs 12x earlier). On consolidated basis, our TP implies valuation of 12x CY22E EV/EBITDA (which is peak valuation of last 10 years). There is 14% downside to our TP, we have Sell rating on the stock."
Key highlights and investment rationale
Q2CY21 snapshot: ACEM Q2CY21 Revenue / EBITDA increased YoY by 55% / 61% YoY. EBITDA margin stood at 28% vs 27% YoY. Operationally, volume increased by 51% YoY at 6.33mt. EBITDA/t increased to Rs 1,495 versus Rs 1,362 QoQ. Opex/t was flat at YoY, on account of lower input costs and efficiency programs. ACEM reported PAT of Rs 7.2 billion up 60% YoY and 9% QoQ. EBITDA/t was supported by sales of value-added product which is up 69% YoY and contributed 12% to sales.
New capex announced in Punjab: ACEM has announced capex of 1.5mtpa GU in Ropar Punjab. Over Mid-term, ACEM plans to reach 50 MTPA capacity from ~30mtpa currently Greenfield integrated plant of 3MTPA clinkerisation and 1.8 MTPA cement grinding to commence operations in Q3CY21. Company’s WHRS projects of 54MW progressing well.
Our view on CY21/22: We factors ACEM volume to increase 21% and 8% YoY in CY21 and CY22. This will result in EBITDA to increase 32% and 9% YoY and company to report EBITDA/t of Rs 1,275 and Rs 1,287 respectively. Volume growth in CY21 factors Marwar plant commissioning.
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