Gujarat Ambuja: A sterling performance - Views on News from Equitymaster

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Gujarat Ambuja: A sterling performance

Oct 29, 2001

Gujarat Ambuja has reported a 112.4% rise in profits for the first quarter ended September 30, 2001 to Rs 532 m.This was primarily led by a 17.2% rise in sales to Rs 3,401 m.

(Rs m)1QFY011QFY02Change
Gross Sales2,9033,40117.2%
Other Income 36 89148.9%
Expenditure2,0532,34614.2%
Operating Profit (EBDIT)8491,05524.2%
Operating Profit Margin (%)29.3%31.0% 
Net Interest 322 247 -23.4%
Depreciation 312 335 7.4%
Profit before Tax251562124.4%
Tax030 
Profit after Tax/(Loss)251532112.4%
Net profit margin (%)8.6%15.7% 
No. of Shares (eoy) (m)147.1155.1 
Diluted Earnings per share* 6.8 13.7  
(* annualised)   

Cartelisation has benefited the company in terms of higher realisations. Average realisation has gone up by 4.2% to Rs 2,332 per metric tonnes (MT). Cement volumes have increased by 13.8% to 1.4 MT during the aforesaid quarter. Production during 1QFY02 has increased by 15.8% to 1.5 MT.

Interest costs are down 23.4% to Rs 247 m as the company has utilised the sum raised through private placements to retire high costs debts. During the quarter, the company allotted 8 m shares at a price of Rs 225 per share on preferential allotment basis to Affinity Investment Limited, an affiliate of Warburg Pincus and also issued 8 m warrants. Each warrant is convertaible into one share, at the option of Affinity Investment Limited at any time upto September 2002 at a price of Rs 225 per share.

One should also keep in mind that cement companies started showing higher growth in profits from the December quarter. So, to that extent, profit growth might be on the lower side in coming quarters as the year on year effect wears down. However, a buoyant housing industry and a slew of road construction projects initiated by the government in the current year should continue to benefit Gujarat Ambuja in the long run.

The scrip is currently trading at Rs 161 on a P/E multiple of 11.7x the annualised 1QFY02 earnings.

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