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Result Synopsis

Orient Cement (ORCMNT) reported a performance beat on all fronts as Revenue/ EBITDA/Adj. PAT came at Rs8.8/1.4/0.67bn (beat YSECe by +5/22/46%). This performance was largely driven by volume & NSR growth of +6% & 3% y/y owing to good
demand from the B2B segment. EBITDA/te came at Rs812 remained muted by 14% y/y in Q4FY23. Company deferred its announced expansion of 3MTPA (2MTPA in Tiroda & 1MTPA in Devapur). As a result, we trimmed our Revenue/EBITDA & PAT estimate by 5/15/36% for FY24 and 5/5/36% for 25E.

Now management prioritizes the Chittapur expansion (3MTPA cement & 2MTPA clinker) to improve the production headroom as the unit has only 1klin running on 100% utilization. Company plans to commission GU in central India (MP) instead of Tiroda GU (2MTPA). Further plans to add 3MTPA clinker & 1MTPA GU at Devapur to cater the GU in MP. Management reiterates its policy to focus on better pricing over higher dispatches to offset cost inflation and improve the margins. We remain POSITIVE on ORCMNT prospects and believe, despite being amongst the low-cost producer, ORCMNT has significant headroom to improve on its efficiency parameters further: 1) Product-mix (Higher Blended Sales), 2) Augmenting Green Power 3) Higher use of alternative fuel 4) Targeting Average TSR of 25% by 2030. ORMNT to generate a OCF of Rs10bn over FY24- 25E would aid to fund its CAPEX partially (Rs19.5bn over FY24-25E). Thereby the Net Debt is expected to rise going forward, management targets to maintain Net Debt/EBITDA below 3x. We maintain our BUY rating with a revised TP of 155, valuing at 6x EV/EBITDA on FY25E.

Result Highlights

* Volume came ~4% above YSECe to 1.7MT, grew by 6% y/y and 20% q/q. Further, NSR was up by 3% y/y and flat q/q (in-line with YSECe) translate to revenue of Rs8.8bn, up by 9% y/y and 20% q/q in Q4FY23.
* Overall Power cost came at Rs1620/te up by 20% y/y and 2% q/q due to high prices fuel inventories despite savings from the solar power source at Jalgaon.
* Freight cost came at Rs1364/te up by 4% y/y and flat q/q due to higher share of road and busy season surcharge levied by railways.
* EBITDA came at Rs1.39bn (v/s Rs1.14bn YSECe) down by 9% y/y but up by 54% sequentially translates to EBITDA margin of 15.9% in Q4FY23 (v/s 13.7% YSECe).
* Reported PAT came at Rs674mn (v/s YSECe Rs463mn), declined by 8% y/y but increase by 145% q/q over healthy operating profit and higher other income.

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