Ambuja Cements Q4 sales seen up 26% at Rs 2283 cr

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By Nigel D'souza, Research Analyst at CNBC-TV18

Ambuja Cements is expected to report a profit after tax of Rs 313.9 crore in the third quarter of FY12, a growth of 83% as compared to Rs 171.5 crore in the previous quarter.

EBITDA too is seen going up sharply by 75% to Rs 509 crore from Rs 290.8 crore quarter-on-quarter.

EBITDA margin is likely to improve at 22.3% in the October-December quarter of FY12 versus 16.1% in an earlier quarter.

Sales are seen going up by 26% to Rs 2,283 crore from Rs 1,805 crore quarter-on-quarter.

Volumes:

- Ambuja sales volume lead by capacity additions and inventory liquidation:

- Sales volume stood at 5.54mt, up 9.9% on a y-o-y and up 18.1% q-o-q

- Dispatches growth driven by gradual capacity ramp up which has taken Ambuja's installed capacity to roughly 27mtpa versus 25mt in CY10

Realizations

- All India cement prices up 19% (y-o-y) and 9% (q-o-q):

- But push-up in sales by calendar year-ending companies (ACC and Ambuja) has led to a Rs 5-10/bag decline in average prices towards December end

- Realizations will be driven by higher volumes and higher cement prices in areas of its existence:

- Ambuja realizations will benefit owing large presence in North And West India:

- Ambuja has relatively large exposure to north & west from where it gets roughly 65% of its revenue

- Prices in north India are up 21% and West India are up 18% on a y-o-y basis

- Prices in these regions have shown an upward movement alongwith demand pick up

- Alert: Ambuja has no presence in South India where prices have remained resilient owing to production discipline

- Price hikes coupled with increased infrastructure activity in West India will lead to better realisations and higher volumes for the quarter

EBITDA margins will be under pressure:

- Higher power and fuel costs due to dependence on indigenous coal and freight costs will limit the gains on the margins front

- Also they import roughly only 30% of their coal requirement and hence will be impacted by the depreciating rupee

PAT impacted by other income and depreciation:

- Increase in depreciation (due to commissioning of 2mn tonnes capacity) would impact PBT and PAT margins

- Ambuja has healthy cash and cash equivalents of approximately Rs 2300 crore and other income will boost the PAT on a y-o-y basis

- However higher depreciation due to commissioning of new plant will impact negatively impact the PAT