Ambuja reported CY08 results that were 13% ahead of our estimates primarily due to the presence of extraordinary items. It was marginally below our estimates on the operating level.
Net sales at Rs16.3 billion is up 9% y-o-y driven by 12% increase in realization. EBITDA at Rs3.9 billion is down 22% on account of 20% increase in per tonne costs. PAT was at Rs2.2 billion.
Ambuja is dependent on imports for 30% of its coal requirement. This quarter has been affected by a 44% y-o-y increase in power and fuel cost as it consumed the highest priced coal. Costs will reduce significantly over next quarter. Also staff costs had a one-off charge of Rs341 million.
This year, the company had resorted to purchase of costly clinker to the tune of 740kt. We expect with the commissioning of its new projects, it will not need outside clinker and this will boost its margins in CY09.
Ambuja Cement is one of the best cement companies in the country, has good expansion plans under execution, and is looking to reduce costs by adding cheaper captive power and increasing blending.
We maintain our OUTPERFORM recommendation and a 12-month price target of Rs80 based on DCF methodology.