Anand Rathi Securities is bullish on Ambuja Cements and has recommended buy rating on the stock with a target of Rs 142, in its October 21, 2010 research report.
"Ambuja’s net profit declined 44% Y-o-Y, lower than our and consensus estimates. Decline in realizations and increase in power & fuel cost led to the drop. We estimate CY11 earnings to be strong, driven by recent price recovery, savings on clinker purchase and strong volume growth."
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"Realisation fell 10% Y-o-Y and 6% Q-o-Q to ~Rs 3,595/ton. Cement dispatch volumes rose 7% Y-o-Y to 4.35 million tons (down 19% Q-o-Q). Domestic volumes increased 7.6% Y-o-Y, while exports declined 32% Y-o-Y."
"EBITDA/ton, at Rs 650, fell 39% Y-o-Y and 42% Q-o-Q mainly due to a drop in realisations. The benefit of lower raw material cost (down ~ Rs 300/ton Y-o-Y due to no clinker purchases) was offset by higher power & fuel cost at Rs 1,025/ ton (up ~ Rs 265/ton due to higher clinker production and fuel prices). ‘Other expense’ at Rs 780/ton (up ~Rs 100/ton) increased due to higher maintenance and selling & distribution cost."
"New clinker units at Chhattisgarh and HP have achieved 50% utilisation levels. Two grinding units (Maratha & Bhatapara) will commence by 4QCY10, taking capacity to 27m tons. A transporters’ strike at its HP plants (3.1m tons) since 7th Oct, stalled production and dispatches. Ambuja expects demand to pick up towards the yearend. It expects medium-term demand and realisations to improve."
"At our target price of Rs 148, the stock would trade at 7.5x CY11 EV/EBITDA, in line with its ten-year average. The target price implies a PE of 14x CY11 and an EV/ton of USD 160," says Anand Rathi Securities research report.
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