Ambuja ru3 qcy2010-221010

Please refer to important disclosures at the end of this report 1
Y/E Dec (` cr) 3QCY2010 2QCY2010 % chg qoq 3QCY2009 % chg yoy
Net sales 1,564 2,048 (23.6) 1,611 (2.9)
Operating profit 302 644 (53.1) 462 (34.5)
OPM (%) 19.1 30.8 (1,174bp) 28.1 (913bp)
Net profit 152 391 (61.1) 318 (52.2)
Source: Company, Angel Research
For 3QCY2010, Ambuja Cements (Ambuja) reported a 52.2% yoy decline in net
profit due to fall in realisations and increased raw-material and power costs.
However, despatches were higher by 6.1% yoy during the quarter. Going ahead,
we expect Ambuja to report higher growth in despatches, aided by capacity
additions and improvement in demand outlook. At current levels, the stock is
fairly priced, owing to which we maintain our Neutral view on the stock.
Bottom line down 52.2% due to lower realisations and higher power costs:
Ambuja’s standalone top line declined 2.9% yoy during 3QCY2010, in line with
our estimates. The decline was despite a 6.1% yoy increase in despatches to
4.4mn tonnes, aided by capacity additions. However, realisations declined by
8.5% yoy to `3,595/tonne. Ambuja’s OPM declined by 913bp yoy to 19.1% on
account of lower realisation and higher import of high-cost imported coal and pet
coke. Coal imports increased due to lower availability of domestic linkage coal.
Further, increased production of clinker during the quarter resulted in a 38%
increase in power costs, thereby lowering the company’s operating margin.
The bottom line declined by 52.2% yoy to `152cr, well below our estimates.
Outlook and valuation: Over CY2009–11E, we expect Ambuja’s top line to
witness a 7.8% CAGR, with despatches expected to record a 9.2% CAGR on the
back of capacity addition. At current levels, the stock is trading at EV/EBITDA of
10.6x and EV/tonne of US $157 on CY2011E estimates and is fairly priced.
Hence, we maintain our Neutral view on the stock.
Key financials
Y/E Dec ( ` cr) CY2008 CY2009 CY2010E CY2011E
Net sales 6,168 7,041 7,335 8,171
% chg 9.5 14.2 4.2 11.4
Net profit 1,094 1,218 1,225 997
% chg (38.2) 11.4 0.6 (18.6)
OPM (%) 27.7 26.5 27.2 22.7
FDEPS (`) 9.2 8.0 8.0 6.5
P/E (x) 15.1 17.4 17.3 21.2
P/BV (x) 3.7 3.3 3.0 2.7
RoE (%) 21.2 20.1 18.0 13.3
RoCE (%) 24.7 23.3 21.5 16.7
EV/Sales 3.3 2.9 2.7 2.4
EV/tonne (US $) 230 196 160 157
Installed capacity (mtpa) 20 23 27 27
EV/EBITDA (x) 12.1 11.0 10.1 10.6
NEUTRAL
CMP `139
Target Price -
Investment Period -
Stock Info
Sector
Bloomberg Code
Shareholding Pattern (%)
Promoters 46.4
MF / Banks / Indian Fls 16.3
FII / NRIs / OCBs 29.4
Indian Public / Others 7.9
Abs. (%) 3m 1yr 3yr
Sensex 11.3 20.1 14.5
Ambuja Cements 21.4 54.8 (4.3)
21,234
0.8
150/82
382653
Cement
Avg. Daily Volume
Market Cap (` cr)
Beta
52 Week High / Low
2
20,165
6,066
ABUJ.BO
ACEM@IN
Face Value (`)
BSE Sensex
Nifty
Reuters Code
Rupesh Sankhe
022-40403800 Ext 319
rupeshd.sankhe@angelbroking.com
V Srinivasan
022-40403800 Ext 330
v.srinivasan@angelbroking.com
Ambuja Cements
Performance Highlights
3QCY2010 Result Update | Cement
October 22, 2010

Ambuja Cements | 3QCY2010 Result Update
October 22, 2010 2
Exhibit 1: 3QCY2010 performance
Y/E Dec (` cr) 3QCY10 2QCY10 % chg qoq 3QCY09 % chg yoy 9MCY10 9MCY09 % chg yoy
Net sales 1,564 2,048 (23.6) 1,611 (2.9) 5,602 5,304 5.6
Other operating income 19 41 (53.4) 32 (40.0) 89 90 (1.5)
Total operating income 1583 2088 (24.2) 1643 (3.6) 5,690 5,394 5.5
Net raw-material costs 61 83 (26.5) 201 (69.7) 377 790 (52.3)
(% of sales) 3.9 4.0 12.5 6.7 14.9
Power & fuel 443 453 (2.4) 322 37.6 1,251 1,096 14.2
(% of sales) 28.3 22.1 20.0 22.3 20.7
Staff costs 99 90 9.8 68 45.6 266 194 36.9
(% of sales) 6.3 4.4 4.2 4.8 3.7
Freight & forwarding 343 447 (23.4) 303 13.1 1,202 974 23.5
(% of sales) 21.9 21.8 18.8 21.5 18.4
Other expenses 336 371 (9.4) 287 16.9 1,049 818 28.2
(% of sales) 21.5 18.1 17.8 18.7 15.4
Total expenditure 1,281 1,444 (11.3) 1,181 8.5 4,145 3,871 7.1
Operating profit 302 644 (53.1) 462 (34.5) 1,545 1,522 1.5
OPM (%) 19.1 30.8 28.1 27.2 28.2
Interest 9 8 10.4 5 71.6 28 16 77.8
Depreciation 102 100 1.7 72 41.5 279 211 32.0
Other income 31 26 17.8 58 (47.2) 155 110 40.4
PBT (excl. extr. items) 222 562 (60.5) 442.3 (49.8) 1,394 1,406 (0.9)
Exceptional items 14.6
PBT (incl. extr. items) 222 562 (60.5) 442 (49.8) 1,394 1,406 (0.9)
Provision for taxation 70 171 (59.0) 124 (43.6) 388 429 (9.5)
(% of PBT) 31.5 30.4 28.0 27.8 30.5
Reported PAT 152 391 (61.1) 318 (52.2) 1,005 977 2.9
PATM (%) 9.7 19.1 19.8 17.9 18.4
Equity capital 305 305 304.6 304.7 304.5
EPS (`) 1.0 2.6 (61.1) 2.1 (52.2) 6.6 6.4 2.8
Adjusted PAT 152 391 (61.1) 318 (52.2) 1,005 977 2.9
Exhibit 2: Financial performance
1,888
1,643
1,788
2,019 2,088
1,564
325 319 241
462 391
152
15
20
25
30
35
0
500
1,000
1,500
2,000
2,500
2QCY09 3QCY09 4QCY09 1QCY10 2QCY10 3QCY10
Net Sales Net Profit OPM (RHS)
(`cr)
(%)

October 22, 2010 3
Exhibit 3: 3QCY2010 – Actual v/s Angel estimates
(` cr) Actual Estimates Variation (%)
Net sales 1,564 1,585 (1.3)
Operating profit 302.2 411.3 (26.5)
Net profit 152.1 262.8 (42.1)
Operational highlights
For 3QCY2010, Ambuja’s realisation/tonne declined by 8.5% on a yoy basis to
`3,595. However, on a positive note, raw-material cost/tonne was down to `140
(`491 in 3QCY2009) due to the avoidance of external clinker purchase during the
quarter as against `157cr of purchase in 3QCY2009. Power and fuel costs/tonne
were higher by 29.7% yoy due to higher clinker production. However, freight
costs/tonne rose by 6.6% yoy due increased diesel costs and higher internal
material transfer. Depreciation cost also moved up by 33.4% yoy, following an
increase in capacity. Operating profit/tonne stood at `651, down 37.9% yoy.
Net profit/tonne for the quarter stood at `306, down 56.3% yoy.
Exhibit 4: Per tonne analysis
(`) 3QCY10 2QCY10 3QCY09 % chg (yoy) % chg (qoq)
Realisation/tonne 3,595 3,834 3,929 (8.5) (6.2)
Power and fuel cost/tonne 1,017 849 785 29.7 19.8
Freight and forwarding
cost/tonne
787 838 739 6.6 (6.0)
Operating profit/tonne 651 1,130 1,049 (37.9) (42.4)
Depreciation/tonne 234 187 175 33.4 24.9
Net profit/tonne 306 656 700 (56.3) (53.4)

October 22, 2010 4
Investment arguments
Capacity addition to maintain robust volume growth
During 1QCY2010, Ambuja expanded its clinker capacity by 4.4mn tonnes per
annum (mtpa) by setting up clinker plants with capacity of 2.2mtpa each at
Bhatapara and Rauri. The company had also commissioned grinding units at
Nalagarh and Dadri (with capacities of 1.5mn tonnes each) in 1QCY2010.
Further, the company will be adding 2mtpa of total grinding capacity at Bhatapara
and Maratha. Ambuja is expected to have overall capacity of 27mn tonnes by the
end of CY2010 post its proposed capacity additions. Going ahead, we expect
capacity additions done by the company to drive growth.
Exhibit 5: Installed capacity
Presence in high-growth regions to ensure better realisations
Ambuja currently derives close to 80% of its revenue from the western and
northern regions, with both the regions having almost equal shares. The remaining
20% is derived from the eastern region. Thus, we expect Ambuja to enjoy better
profitability as compared to players with significant exposure to the south due to
the presence in the high-growth northern and eastern regions.
Setting up of new capacities to improve margins substantially from CY2010
During CY2009, Ambuja’s OPM was affected by 400bp due to external purchase
of close to 1.7mn tonnes of high-cost clinker. However, going ahead, we expect
Ambuja to enjoy significant margin expansion due to the commissioning of
4.4mtpa of clinker capacities in 1QCY2010. Production at the company’s clinker
plants has stabilised, resulting in the elimination of external clinker purchase in
3QCY2010. Ambuja is also expected to record savings in energy cost, with the
commissioning of new captive power capacities. The company, which
commissioned a 33MW captive power at Bhatapara (33MW), has set up another
30MW power plant at Ambuja Nagar, which would take its overall captive power
capacity beyond 400MW.
19
22
24
27 27
0
5
10
15
20
25
30
CY2007 CY2008 CY2009 CY2010E CY2011E
(mtpa)

October 22, 2010 5
Outlook and valuation
We expect Ambuja’s top line to register a 7.8% CAGR over CY2009–11E, with
despatches expected to record a 9.2% CAGR on the back of capacity addition.
At current levels, the stock is trading at EV/EBITDA of 10.6x and EV/tonne of
US $157 on CY2011E estimates and is fairly priced. Hence, we maintain our
Neutral view on the stock.
Exhibit 6: Change in estimates
CY10E CY11E
(` cr) Earlier Revised Chg (%) Earlier Revised Chg (%)
Net sales 7,277 7,335 0.8 8,033 8,171 1.7
Operating exp. 5,494 5,337 (2.9) 5,991 6,314 5.4
Operating profit 1,783 1,998 12.1 2,042 1,858 (9.0)
Depreciation 388 388 0.0 443 481 8.6
Interest 15 15 0.0 19 21 12.1
PBT 1,599 1,815 13.5 1,842 1,478 (19.8)
Tax 520 590 13.5 599 480 (19.8)
PAT 1,079 1,225 13.6 1,243 997 (19.8)
Source: Angel Research
Exhibit 7: Key assumptions
Earlier estimates Revised estimates
CY10E CY11E CY10E CY11E
Installed capacity (mtpa) 25 27 27 27
Growth (%) 11 8 20 0
Utilisation (%) 83 85 77 85
Despatches (mn tonnes) 20.8 23 20.8 23
Net realisation/tonne (`) 3,500 3,500 3,575 3,646
Growth (%) (6) - (4) 2
Raw-material costs/tonne (`) 420 357 420 510
Power cost/tonne (`) 768 775 768 800
EBITDA/tonne (`) 858 846 974 829
Source: Angel Research

October 22, 2010 6
Exhibit 8: One-year forward EV/EBITDA band
Exhibit 9: One-year forward EV/tonne band
Exhibit 10: Recommendation summary
Company Reco. CMP Tgt. price Upside FY2012E FY2012E FY2010-12E FY2012E FY2012E
(`) (`) (%) P/BV (x) P/E (x) EPS CAGR (%) RoCE (%) RoE (%)
ACC* Neutral 984 - - 2.5 19.3 (22.5) 16.1 13.4
Ambuja Cements* Neutral 139 - - 2.7 21.4 (9.9) 16.7 13.3
Grasim Neutral 2,252 - - 1.1 9.0 (10.9) 14.1 12.4
India Cement Buy 113 139 23.0 1.0 26.9 (39.6) 4.5 3.0
JK Lakshmi Buy 62 92 48.3 0.6 5.3 (22.9) 10.0 11.3
Kesoram Ind. Buy 304 437 44.0 0.7 4.6 13.1 11.8 16.3
Madras Cement Buy 112 139 23.7 1.4 12.8 (23.1) 9.1 11.9
UltraTech Neutral 1,111 - - 1.9 14.9 (7.9) 15.2 14.0
Source: Company, Angel research; Note: *December year end
0
10,000
20,000
30,000
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
(EV ` cr)
12x
3x
6x
9x
0
10,000
20,000
30,000
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
$70 $100 $130 $160
(EV`cr)

October 22, 2010 7
Profit & Loss Statement (Standalone)
Y/E Dec (` cr) CY06 CY07 CY08 CY09 CY10E CY11E
Total operating income 6,275 5,631 6,168 7,041 7,335 8,171
% chg 138.6 (10.3) 9.5 14.2 4.2 11.4
Total Expenditure 4,135 3,586 4,461 5,174 5,337 6,314
Net Raw Materials 393.2 397.9 519.3 1,013.9 734 1,144
Other Mfg costs 1,240 1,020 1,326 1,423 1,576 1,793
Personnel 233 209 266 273 314 370
Other 2,269 1,960 2,350 2,464 2,714 3,007
EBITDA 2,139 2,045 1,707 1,867 1,998 1,858
% chg 196.5 (4.4) (16.5) 9.4 7.0 (7.0)
(% of Net Sales) 34.1 36.3 27.7 26.5 27.2 22.7
Depreciation& Amortisation 326 236 260 297 388 481
EBIT 1,813 1,809 1,447 1,570 1,610 1,376
% chg 244.6 (0.2) (20.0) 8.5 2.6 (14.5)
(% of Net Sales) 28.9 32.1 23.5 22.3 22.0 16.8
Interest & other Charges 113 76 32 22 15 21
Other Income 94 194 246 256 220 123
(% of PBT) 5.2 10.0 14.8 14.2 12 8
Recurring PBT 1,794 1,926 1,662 1,803 1,815 1,478
% chg 241.0 7.4 (13.7) 8.5 0.7 (18.6)
Extraordinary Expense/(Inc.) (48) (786) (308) - - -
PBT (reported) 1,842 2,712 1,970 1,803 1,815 1,478
Tax 338 943 568 585 590 480
(% of PBT) 18.4 34.8 28.8 32.4 32.5 32.5
PAT (reported) 1,503 1,769 1,402 1,218 1,225 997
ADJ. PAT 1,456 983 1,094 1,218 1,225 997
% chg 205.9 (32.5) 11.3 11.4 0.6 (18.6)
(% of Net Sales) 23.2 17.5 17.7 17.3 16.7 12.2
Basic EPS (`) 9.9 11.6 9.2 8.0 8.0 6.5
Fully Diluted EPS (`) 9.9 11.6 9.2 8.0 8.0 6.5
% chg 216.1 17.5 (20.6) (13.2) 0.6 (18.6)

October 22, 2010 8
Balance Sheet (Standalone)
SOURCES OF FUNDS
Equity Share Capital 305 305 305 305 305 305
Preference Capital - - - - - -
Reserves& Surplus 3,187 4,356 5,368 6,166 6,833 7,539
Shareholders’ Funds 3,492 4,661 5,673 6,471 7,138 7,843
Total Loans 865 330 289 166 216 266
Deferred Tax Liability 384 378 381 486 486 486
Total Liabilities 4,741 5,370 6,342 7,122 7,839 8,595
APPLICATION OF FUNDS
Gross Block 4,543 5,231 5,707 6,224 8,424 9,624
Less: Acc. Depreciation 2,053 2,271 2,514 2,784 3,172 3,653
Net Block 2,489 2,960 3,193 3,440 5,253 5,971
Capital Work-in-Progress 635 697 1,947 2,714 914 1,714
Goodwill - - - - - -
Investments 1,133 1,289 332 727 727 727
Current Assets 1,178 1,587 2,339 1,979 2,704 2,213
Cash 378 643 852 880 1,302 685
Loans & Advances 296 205 300 253 314 387
Other 504 739 1,188 846 1,088 1,141
Current liabilities 702 1,169 1,474 1,741 1,761 2,034
Net Current Assets 476 418 865 238 943 179
Mis. Exp. not written off 8 6 4 3 3 3
Total Assets 4,741 5,370 6,342 7,122 7,839 8,595

October 22, 2010 9
Cash Flow Statement (Standalone)
Profit before tax 1,842 2,712 1,970 1,803 1,815 1,478
Depreciation 326 236 260 297 388 481
Change in WC (11) (78) (432) 544 (718) (37)
Less: Other income 94 194 246 256 220 123
Direct taxes paid 338 943 568 585 590 480
Cash Flow from Operations 1,724 1,734 983 1,804 674 1,319
(Inc)/ Decin Fixed Assets (1,274) (750) (1,726) (1,284) (400) (2,000)
(Inc)/ Dec in Investments (8) (156) 957 (395) - -
(Inc)/ Dec in loans and advances - - - - - -
Other income 94 194 246 256 220 123
Cash Flow from Investing (1,188) (713) (523) (1,423) (180) (1,877)
Issue of Equity 257 32 1 7 - -
Inc./(Dec.) in loans (262) (535) (42) (123) 50 50
Dividend Paid (Incl. Tax) 138 178 178 214 108 88
Others 113 76 32 22 15 21
Cash Flow from Financing (257) (757) (251) (352) (73) (59)
Inc./(Dec.) in Cash 279 264 209 29 422 (617)
Opening Cash balances 99 378 643 851 880 1,302
Closing Cash balances 378 643 851 880 1,302 685

October 22, 2010 10
Key Ratios
Y/E Dec. CY06 CY07 CY08 CY09 CY10E CY11E
Valuation Ratio (x)
P/E (on FDEPS) 11.6 9.9 12.5 14.4 17.3 21.2
P/CEPS 9.6 8.7 10.5 11.6 13.1 14.3
P/BV 5.0 3.8 3.1 2.7 3.0 2.7
Dividend yield (%) 0.8 1.0 1.0 1.2 0.5 0.4
EV/Sales 2.9 3.1 2.7 2.4 2.7 2.4
EV/EBITDA 8.4 8.4 9.9 9.0 10.1 10.6
EV / Total Assets 3.8 3.2 2.7 2.4 2.6 2.3
Per Share Data (`)
EPS (Basic) 9.9 11.6 9.2 8.0 8.0 6.5
EPS (fully diluted) 9.9 11.6 9.2 8.0 8.0 6.5
Cash EPS 12.0 13.2 10.9 9.9 10.6 9.7
DPS 0.9 1.2 1.2 1.4 0.7 0.6
Book Value 22.9 30.6 37.3 42.5 46.8 51.5
DuPont Analysis (%)
EBIT margin 28.9 32.1 23.5 22.3 22.0 16.8
Tax retention ratio 81.6 65.2 71.2 67.6 67.5 67.5
Asset turnover (x) 1.5 1.2 1.2 1.2 1.1 1.1
ROIC (Post-tax) 35.9 26.0 20.2 18.1 17.0 12.9
Cost of Debt (Post Tax) 10.7 8.3 7.4 6.7 5.3 6.0
Leverage (x) 0.3 0.0 (0.1) (0.1) (0.1) (0.1)
Operating ROE 43.6 26.6 19.1 16.9 15.5 12.2
Returns (%)
ROCE (Pre-tax) 43.0 35.8 24.7 23.3 21.5 16.7
Angel ROIC (Pre-tax) 49.7 46.6 38.2 44.4 35.2 23.3
ROE 51.3 24.1 21.2 20.1 18.0 13.3
Turnover ratios (x)
Asset Turnover (Gross Block) 1.5 1.2 1.1 1.2 1.0 0.9
Inventory / Sales (days) 21.1 32.1 45.0 42.0 37.8 39.0
Receivables (days) 3.9 7.6 11.0 9.8 9.9 10.5
Payables (days) 48.5 95.2 108.1 113.4 119.8 109.7
WC cycle (ex-cash) (days) 11.8 (4.1) (6.2) (16.3) (24.9) (19.3)
Solvency ratios (x)
Net debt to equity 0.1 (0.1) (0.1) (0.1) (0.2) (0.1)
Net debt to EBITDA 0.2 (0.2) (0.3) (0.4) (0.5) (0.2)
Interest Coverage (EBIT / Interest) 16.0 23.8 45.1 70.0 106.7 64.8

October 22, 2010 11
Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
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risks of such an investment.
Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make
investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this
document are those of the analyst, and the company may or may not subscribe to all the views expressed within.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
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sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
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Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please
refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and
its affiliates may have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement Ambuja Cements
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors.
Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)

Ambuja ru3 qcy2010-221010

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