Ambuja Cement Q4 - Focused Efforts Towards Efficiencies To Bridge Valuation Gap With Leaders: Yes Securities

Yes Securities Report

Ambuja Cements Ltd. reported a volume and net sales realisation growth of 8% & 3% YoY translates in revenue growth of 11% YoY to Rs 41.3 billion (versus our estimate of Rs 40.8 billion).

Ebitda came in at Rs 6.3 billion up by 10% YoY with Ebitda Rs 813/tonne (17% above our estimate) aided by muted cost/tonne up by 2% YoY (7% lower than our estimate).

Reported profit after tax came in at Rs 3.7 billion (versus Rs 2.7 billion our estimate) up by 47% YoY owing to substantial increase in other income to Rs 890 million over dividend income from ACC Ltd.

In recent years, Ambuja Cement narrowed the efficiency gap with its peers by adopting cost‐effective measures optimisation of lead distance under master supply agreement and optimising fixed costs and specific energy consumption under ‘Parvat’.

Furthermore, the efficiencies are expected to improve under the new management with fresh investments of ~Rs 100 billion in;

1. augmenting waste heat recovery system and renewable energy capacities,

2. ramp up AFR usage,

3. installing fly ash dryers and other debottlenecking measures to improve kiln efficiencies,

4. higher trade and blending ratio (80 and 85% currently).

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