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Strong in-line performance

Orient Cement (ORCMNT) reported a solid 3QFY21 (in line with our estimates). Strong pricing and fuel mix optimisation more than offset impact of sales loss, mainly in Telangana. Thus, revenue/EBITDA grew 7/149% YoY to Rs 6.05/1.37 bn. Lower depreciation further boosted APAT to Rs 539mn vs net loss of Rs 57mn YoY. We continue to like ORCMNT for its efficient opex and balance sheet focus. We maintain our BUY rating on the stock with an unchanged target price of Rs 117sh (7x Dec’22E EBITDA).

* Key highlights: Orient’s sales volume fell 8% YoY, dragged by continued contraction in project demand, particularly in Telangana. NSR remained firm at +17% YoY, despite 5% QoQ cool off. Orient’s fuel mix optimisation and efficiency gains offset the impact of high diesel prices and lower utilisation. Thus, opex remained flat YoY. Unitary EBITDA remained firm at Rs 1,006/MT (+171% YoY), on solid pricing gains. Amid low Capex spends and better WC controls, Orient used its cash flow to reduce gross/net debt over the past nine months by 25/30% to Rs 9/8.2bn respectively. Orient is debottlenecking its Telangana grinding capacity by 0.5 mn MT (by 1QFY22), adding 13MW solar power plant in Maharashtra through JV (by 2QFY23) and setting up 10MW WHRS in Karnataka (by 2QFY23). It is also planning to add a 2mn MT green-field grinding unit (by end FY23). The plant location is not yet finalized.

* Outlook: We maintain our earnings estimates. We like ORCMNT for its improved cost efficiencies (which is bolstering its profit outlook), and balance sheet focus. We maintain our BUY rating on the stock with an unchanged target price of Rs 117sh (7x Dec’22E EBITDA).

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