We hosted Neeraj Akhoury, CEO India, LafargeHolcim and MD & CEO of Ambuja Cement (ACEM), and Rajani Kesari, CFO LafargeHolcim India and CFO of ACEM, on the company’s very first ever earnings contact. Key takeaways consist of: (i) management expects market to post robust 15-17% y-o-y demand development in CY21, aided inter alia by low base (ii) India has been a ‘growth’ marketplace for LafargeHolcim group, therefore it would continue to invest in India (iii) accomplished sustainable expense savings of ~Rs 200/te by way of expense rationalisation and in-property efficiency programme I Can share of green energy to improve to 38% by Dec’22 from the present 5% and (iv) accomplished synergies worth Rs 2.5 bn (>5% of PBT) in CY20 by way of MSA with ACC (this is most likely to improve with incremental volumes and synergies).
We keep our standalone CY21e-22E Ebitda and raise our TP to Rs 330 (from Rs 300) based on 10x FY23e EV/E on half-yearly rollover. Maintain Buy. Key dangers: decrease demand/costs.
Q4CY20 standalone Ebitda at Rs 7.7 bn (up 40% y-o-y) was larger than our estimates led by greater than anticipated realisation, which remained broadly flat q-o-q (up 6% y-o-y) vs our estimate of 2% q-o-q decline. Accordingly, Ebitda/te elevated 30% y-o-y to Rs 1,089/te. Total expense/te declined 1.5% y-o-y owing to several operational efficiencies, even though it grew 1.7% q-o-q due to larger fuel/diesel fees. Variable expense/te was flat y-o-y with other expenditures/te down 8% y-o-y. On a q-o-q basis, variable expense/te grew by Rs 95 owing to larger fuel/ diesel fees, when other expenditures/te was flat in spite of larger volumes. PAT grew 41% y-o-y to Rs 5 bn.
Standalone revenues rose 14% y-o-y to Rs 34.7 bn (I-Sec: Rs 33.8 bn). Realisation elevated 6% y-o-y (declined only .5% q-o-q ) to Rs 4,919/te led by larger costs in North and West regions. The share of unique goods elevated to 12% of trade sales in Q4CY20. Volumes elevated 8% y-o-y to highest-ever 7.05mnte (implying >90% utilisation) led by sturdy development in East and North regions. Management expects elevated government thrust on infrastructure, rural housing demand and enhancing industrial/industrial capex to drive robust 15-17% y-o-y market development in CY21.
India has been a ‘growth’ marketplace for LafargeHolcim group, therefore it would continue to invest in the nation. Over 10mnte capacities would be commissioned more than next 2-3 years amongst ACC and ACEM. Besides, ACEM is exploring expansions at Bhatapara in East and Maratha in West. The group expects to sustain its volume marketplace share in India right after losing some in the previous decade.
3mnte clinkerisation at Marwar Mundwa, Rajasthan, along with 1.8mnte grinding unit is anticipated to be commissioned by Jun’21. This will not only strengthen the company’s marketplace share in North and Gujarat, but also enhance general profitability as the profitability of this plant is anticipated to be greater than the firm typical.