HDFC Securities said, ''We maintain BUY on Ambuja Cements with a TP of Rs 245 (SOTP based). In 4QCY19, ACEM reported healthy volume growth and margin expansion (though EBITDA came in 7% lower vs our est). Standalone net sales/EBITDA/APAT rose 10/36/28% YoY to Rs 31.36/5.47/3.33bn resp. ACEM also closed CY19 with record high OCF.''
Sales vol firmed up 7% YoY (+25% QoQ) in Q4 to 6.5mn MT (in-line our est), as against 7% fall in the preceding six months. Strong pricing in north/central regions kept NSR 3% higher YoY (despite 5% QoQ slide on weak pricing in east and Maha mkts).
Opex fell 1/5% YoY/QoQ on falling energy costs and fixed cost controls. Input costs remained flat QoQ (up 3% YoY) mainly on account of higher OPC sales, even though as fuel prices declined. Freight costs also fell 7% YoY (flat QoQ). Cost controls and vol pick up drove op-lev gains.
Unitary EBITDA rose 27% YoY to Rs 837/MT aided by both pricing and cost tailwinds (however, 8% lower vs our est of Rs 911/MT). On QoQ basis, NSR fall got negated by cost moderation, leading to flattish margin. Thus, EBITDA rose 36% on both higher vol and margin expansion. APAT grew at a slower pace of 28% YoY on account of lower other income, slightly higher capital charges and higher tax rate (despite ACEM moving to new corp tax rate).
''We like ACEM for its healthy margin profile and cashflows. Upcoming expansion will arrest market share loss. We maintain BUY with an SOTP based TP of Rs 245 (implies EV of USD 145/MT). We value ACEM’s standalone cement biz at 11x its Mar'22E EBITDA and its 50% stake in ACC at 20% holding disc. We value ACEM at 20% disc to its 5-yr mean EV/EBITDA (and in-line ACC's val) for its continued market share loss amid lack of major expansions in past,'' it concluded.
