BQ Prime's special research section collates quality and in-depth equity and economy research reports from across India's top brokerages, asset managers and research agencies. These reports offer BQ Prime's subscribers an opportunity to expand their understanding of companies, sectors and the economy.
Yes Securities Report
Orient Cement Ltd.'s result came largely in-line with our estimates. Volume/net sales realisation grew by 15% and 2% YoY resulted in revenue 17% YoY in Q2 FY24. Unexpected fall in raw material cost/tonne by 23% YoY led total cost/tonne to decline by 6% YoY during the quarter.
As a result, healthy NSR with eased cost translates to Ebitda/tonne of Rs 607 against Rs 263 in Q2 FY23. Ebitda came in at Rs 865 million, registering a growth of 166% YoY, whereas profit after tax came to Rs 246 million against net loss of Rs 95 million in Q2 FY23.
Now management prioritised the Chittapur expansion (three million tonnes per annum cement and and 2 mtpa clinker) to improve the production headroom as the unit has only one kiln running on 100% utilisation.
Furthermore, the company plans to add 3 mtpa clinker and 1 mtpa grinding unit at Devapur to cater the 2 mtpa of GU in Madhya Pradesh by FY25E.
Management guided +12% YoY volume growth to 6.5 million tonnes for FY24E and reiterates its policy to focus on better pricing over higher dispatches to improve the margins.
We remain positive on Orient Cement for being an efficient and low-cost producer and believe it has a significant headroom to improve further through-
Product-mix (higher blended sales),
Augmenting Green Power
Higher use of alternative fuel (TSR of 25% by 2030).
Orient Cement to generate a operating cash flow of Rs 10 billion over FY24-26E which would partially fund its capex of Rs 25-30 billion over FY24-26E.
Therefore, net debt is expected to rise going forward, limiting the earning visibility (net debt/Ebitda guidance of less than three times). Hence, we believe a strong pricing environment will be vital for Orient Cement to achieve better profitability and reduce its dependency on borrowings.
At current market price stock trades at 11/nine times EV/Ebitda on FY25/26E.
We rolled forward our estimates to FY26 and arrived at target price to Rs 216/share, valuing at 8.5 times EV/Ebitda on FY25E with 'Neutral' rating.
Click on the attachment to read the full report:
DISCLAIMER
This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
