For 3QCY2015, Ambuja Cements (ACEM) reported an in line set of numbers on
the operational front. The company reported a 1.7% yoy growth in cement
volumes to 4.9mt (marginally below our estimate of 4.95mt). The
realization/tonne declined by 5.8% yoy to Rs4,276 (below our estimate of Rs4,345).
The EBITDA fell by 21.2% yoy to Rs310.1cr (in line with our estimate of Rs318.6cr).
The EBITDA/tonne at Rs633, is down by 22.5% on a yoy basis (in line of our
estimate of Rs643).
EBIDTA margin down 317bp yoy: For 3QCY2015, ACEM’s top-line fell by 4.2%
yoy to Rs2,095.2cr, impacted by weak demand and fall in realization. The
company’s volume rose by 1.7% yoy (fell 16.7% qoq) to 4.9mt, while realization
was down by 5.8% yoy due to pricing pressure in its key markets of North and
West regions. However, the operating performance was in line with our estimates,
led by operational efficiency. The company’s EBIDTA declined by 21.2% yoy to
Rs310.1cr but was in line with our estimate of Rs318.9cr. The EBIDTA decline was
led by weak realization and increase in other expenses (led by Rs40cr provision for
DMF). Hence the EBIDTA margin, at 14.7%, declined by 317bp yoy, but was in
line with our estimate. The Reported PAT fell by 35.8% yoy to Rs153.6cr (below our
estimate of Rs220.2cr), mainly due to higher depreciation and lower other income.
Outlook and valuation: Going forward, we expect ACEM’s volume growth to
remain under pressure due to lack of capacity, for the next two years. However,
we expect the top-line to register an 8.1% CAGR over CY2014-17E. At the current
market price, the stock is trading at an EV/tonne of US$150 on CY2017E
installed capacity and 10.6x EV/EBIDTA of CY2017E. We maintain our
Accumulate rating on the stock with target price of Rs233 on 12.5x EV/EBIDTA and
EV/tonne of US$165 on CY2017E installed capacity.

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