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SMR
08-07-2015, 07:43 AM
Orient Cement Limited is an India-based company engaged in the manufacture and sale of cement. The Company's manufacturing facilities are located at Devapur in Telangana and Jalgaon in Maharashtra. The Company's products include Birla A1 Premium Cement, Birla A1 Premium Cement-OPC 53 Grade and Birla A1 Premium Cement-OPC 43 Grade. The Company is part of the CK Birla Group.

Official Website: www.orientcement.com

SMR
08-07-2015, 07:44 AM
For 1QFY2016, Orient Cement (Orient) reported a disappointing set of numbers; its top-line has come in below our estimate due to a sharp dip in volume and a higher than expected fall in realization. The revenue declined by 8.3% yoy to Rs348.9cr on back of sharp volume decline of 10.2% yoy. Realization during the quarter increased by 2.1% yoy but declined by 8.1% qoq as cement prices in its key region, ie West India, witnessed a sharp decline during the quarter. The EBITDA also declined by 7.7% yoy to Rs59.1cr as against Rs64.1cr reported during the corresponding quarter last year, and was below our estimate of Rs76.8cr. However, the EBITDA margin improved by 30bp yoy to 17.0% but was below our estimate of 19%. EBITDA/tonne came in at Rs610 as against our estimate of Rs714. Consequently, the net profit declined by 20% yoy to Rs27.9cr, led by disappointing top-line numbers. EBITDA margin increased by 30bp yoy: Orient reported a marginal increase in its EBITDA margin by 30bp yoy to 17%, on account of decline in operating cost. However EBITDA margin is below our estimate of 19.0% due to a higher than expected fall in the realization. Operating cost/tonne increased by just 2% yoy to Rs2,987 as against our estimate of Rs3,043. Hence, EBITDA/tonne came in at Rs610, an increase of 2.8% yoy. Going forward, we expect cement demand to improve in 2HFY2016 on expectation of increase in infrastructure spending, which could improve realization, and thereby would lead to improvement in margin from 19.2% in FY2015 to 22.2% in FY2017. Outlook and Valuation: Going ahead, we expect sales volume to remain strong and grow at 22.1% CAGR during FY2015-17 on back of new capacity addition. Realization growth is expected to improve in 2HFY2016, which would lead to topline CAGR of 28.2% during FY2015-17. Hence, we expect EBITDA to grow at 37.8% CAGR during the same period. However given the expensive valuation of 8.8x EV/EBITDA and EV/tonne of $90 on FY2017E, we maintain our Neutral recommendation on the stock. We have assigned a multiple of 9.0x EV/EBITDA and EV/tonne of $90 on FY2017E to arrive at a fair price of Rs183.

Source: http://www.angelbroking.com/