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Gujarat Ambuja: Above par - Views on News from Equitymaster
 
 
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  • Jan 24, 2002

    Gujarat Ambuja: Above par

    Gujarat Ambuja (GACL) has reported yet another good show for the second quarter ended December 31, 2001. The highlight of the result is the sharp rise in sales despite the slowdown in the economy.

    (Rs m) 2QFY01 2QFY02 Change 1HFY01 1HFY02 Change
    Net sales 2,982 3,501 17.4% 5,498 6,494 18.1%
    Other Income 21 51 142.1% 57 140 143.4%
    Expenditure 1,961 2,334 19.0% 3,628 4,272 17.7%
    Operating Profit (EBDIT) 1,021 1,167 14.3% 1,871 2,222 18.8%
    Operating Profit Margin (%) 34.2% 33.3%   34.0% 34.2%  
    Interest 390 261 -33.1% 713 508 -28.7%
    Depreciation 327 337 3.1% 639 673 5.2%
    Profit before Tax 325 619 90.6% 576 1,181 105.1%
    Tax - 48   - 78  
    Profit after Tax/(Loss) 325 572 76.0% 576 1,104 91.6%
    Net profit margin (%) 10.9% 16.3%   10.5% 17.0%  
    No. of Shares (m) 147.2 147.2   147.2 147.2  
    Diluted Earnings per share* 8.8 15.5   7.8 15.0  
    P/E Ratio   13.7     14.2  

    The total clinker production was higher by 12% at 1.4 m tonnes against 1.3 m tonnes in the second quarter of the previous year. Similarly, production of cement was higher by 18% at 1.8 m tonnes against 1.5 m tonnes. Sales growth was led by higher sales in the domestic markets, which has increased from 1.2 m tonnes in 2QFY01 to 1.5 m tonnes in 2QFY02. Exports have also increased by 8%, thus contributing to almost 17% of sales in absolute terms. Thanks to the cartelisation effect, per bag realisation has remained more or less at the previous year's levels.

    Key numbers…
    (MT) 2QFY01 2QFY02 Change 1HFY01 1HFY02 Change
    Production            
    – Clinker 1.3 1.4 12.0% 2.4 2.7 14.2%
    – Cement 1.5 1.8 18.1% 2.8 3.3 17.0%
    Sales            
    – Clinker - - - 0.0 - -
    – Cement 1.5 1.8 17.9% 2.8 3.3 16.0%

    Margins have come down by 90 basis points on account of higher raw material costs pertaining to clinker purchases, which hitherto the company was manufacturing itself. Clinker costs as a percentage of total expenses stood at 5% in 2QFY02. But GACL has benefited from lower freight and forwarding costs, which have fallen from 26% of expenses last year to 20% in 2QFY02. Consequently, operating margins for the first half of the current fiscal has increased by 20 basis points. The interest expenses during the current period have declined by 33% on account of restructuring of the high interest bearing debt and retirement of debt.

    The second stats…
    (Rs m) 2QFY00 2QFY01 2QFY02
    Sales 2,830 2,982 3,501
    OPM (%) 38.2% 34.2% 33.3%
    Interest 220 390 261
    Net profit 550 326 572
    NPM (%) 19.4% 10.9% 16.3%

    The company in its press release has stated that cement demand would grow by more than 8% during FY02 in light of sustained demand from housing and road construction sectors. It has also stated that the growth in demand of cement has picked up very well during last 5 months and it has been growing at around 12%. For the first 9 months (April-December 2001), cement despatches of the industry have totaled to 74.5 m tonnes as against 69.4 m tonnes, an increase of 7%. The construction of green field cement plant (Maratha Cement Works) in Chandrapur district (Maharashtra) has been completed and trial production has commenced. This would enable the company to post higher growth in sales in the second half of the current fiscal.

    The stock currently trades at Rs 213 implying a P/E multiple of 14.2x annualised 2QFY02 earnings.

     

     

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