Ambuja Cements up 2% post better Dec quarter show; brokerages cautious


Shares of Ambuja Cements were up over 2 percent intraday on Wednesday as investors reacted to the December quarter performance of the company.

The company’s Q4CY17 beat analyst expectations as standalone net profit growth of 88.8 percent year-on-year at Rs 338 crore was far ahead of CNBC-TV18 poll estimates of Rs 251 crore.

Profit in year-ago quarter stood at Rs 179 crore.

The cement maker said standalone revenue from operations increased 21.9 percent to Rs 2,712.6 crore in Q4, compared to Rs 2,224.5 crore in same quarter last year.

Cement sales volume showed a 17.4 percent growth at 5.87 million tonnes for quarter ended December 2017, increased from 5 million tonnes in year-ago.

EBITDA (earnings before interest, tax, depreciation and amortisation) growth of 61.5 percent year-on-year at Rs 540.6 crore and margin expansion of 480 basis points at 19.9 percent in Q4 were also far ahead of CNBC-TV18 poll estimates of Rs 394 crore and 15.2 percent, respectively.

“A higher than estimated sales volume and cost control measures with increased contribution of premium products resulted in healthy and better performance,” Binod Kumar Modi, Senior Research Analyst Reliance Securities said while maintaining positive stance on the company.

However, brokerages were cautious on the stock, citing volume growth issues ahead on the back of weak demand trends.

Brokerage: Credit Suisse | Rating: Underperform | Target: Raised to Rs 220

Credit Suisse said that it is cautious on the stock as demand trend is still weak. The stock is factoring in 3-yr upcycle whereas upcycle is yet to start, it said, adding that it has cut CY18 EPS estimate by 13% due to weak ASP.

Brokerage: Motilal Oswal | Rating: Neutral | Target: Rs 290

Motilal Oswal said that limited capacity addition could constrain volume growth. Further, volume is seen at CAGR of 5 percent over CY17-19. While it believes valuations appear expensive, it sees only 10 percent upside from current levels.

Brokerage: CLSA | Rating: Buy | Target: Rs 325

CLSA said that sharp sequential drop in unit costs is inexplicable and observed that some of the cost gains may not continue.moneycontrol