Ambuja Cements share price rose over 4 percent in early trade on April 28 after the company declared its March quarter earnings.
It reported a consolidated profit of Rs 742.59 crore in Q1 CY20, a 6.8 percent growth over the same period last year.
Consolidated revenue from operations dropped 8.5 percent year-on-year to Rs 6,249.66 crore due to a fall in sales volumes.
At operating level, consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) grew 19.5 percent YoY to Rs 1,191.33 crore. Margin shot up 454 bps to 19.4 percent due to fall in power and fuel cost (down 13.7 percent) and freight and forwarding expenses (down 11.1 percent YoY).
On a standalone basis, Ambuja Cements' Q1 CY20 profit declined 6.5 percent YoY to Rs 399.1 crore and revenue fell 3.4 percent to Rs 2,827.54 crore.
The broking firm maintained an accumulate rating on the stock with an upward revised target of Rs 192 based on (10x standalone CY21E EV/EBITDA) and ACEM’s 50 percent stake in ACC at 20 percent holding discount.
It expect 1.2%/ 4.1%/ 4.3% revenue/ EBITDA/ APAT CAGR over CY19-21E led by -12.6%/ 14.3% volume growth and 0.5%/ 2% cement realisation growth in CY20E/ CY21E.
The broking house expects the sector to repeat tight discipline, partially offsetting volume fall. However, it kept its CY20e/CY21e earnings estimates unchanged for the company with a buy rating and target of Rs 190, EV/EBITDA of 10.5x CY21e.
The company has reported strong standalone Q1 results as its EBITDA was up 30 percent YoY despite volumes falling 10 percent.
The cost control for Ambuja & ACC should partly cushion weak volumes. It has maintained an outperform rating and raised target to Rs 194 from Rs 173 per share.
The company has delivered on all counts – volume growth, realisations & costs and stood out in a tough operating environment owing to strong execution.
The expansion will provide volume growth visibility/logistical cost advantages.
The valuations are reasonable at current levels and maintained overweight call with a target at Rs 186 per share.At 09:30 hrs, Ambuja Cements was quoting at Rs 175.50, up Rs 3.20, or 1.86 percent on the BSE.