Construction Industry News
“During 2QCY2011, Ambuja Cements (Ambuja) reported an 11.2% yoy decline in its bottom line to Rs348cr. The company’s net profit was ahead of our estimates on account of an 8.5% yoy improvement in realisation. Realisation was higher during the quarter as cement prices, which touched the peak in March 2011, remained strong until May. However, despite better realisations, the company faced margin pressures on account of higher power and fuel and freight costs.”
“For 2QCY2011, Ambuja posted 6.1% yoy growth in its net sales to Rs2,173cr. The company’s dispatches during the quarter decreased by 2.2% yoy to 5.29mn tonnes. The decline in dispatches was due to weak demand in the company’s key markets situated in the northern and western regions. OPM for the quarter fell by 350bp yoy to 27.3%. EBITDA/tonne stood at Rs1,101 down 1.2% yoy. All-India cement dispatches, which witnessed a marginal decline in 1QFY2012, are expected to pick-up post the monsoons. Demand growth is expected to be driven by infrastructure activities with FY2012 being the last year of the Eleventh Plan. Demand from poll-bound Uttar Pradesh is also expected to pick-up going ahead. However, the ongoing SFIO investigation on cement pricing might soften the extent of price recovery due to the pick-up in demand post the cessation of monsoons. At current levels, the stock is trading at fair valuations of 6.9x EV/EBITDA and EV/tonne of US$129 on CY2012 estimates. Hence, we recommend a Neutral rating on the stock,” says Angel Broking research report.
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