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Orient Cement Ltd

About the Company

Orient Cement Ltd is primarily engaged in the manufacture and sale of Cement and its manufacturing facilities at present are located at Devapur in Telangana, Chittapur in Karnataka and Jalgaon in Maharashtra.

 

Q4FY22 Updates

Financial Results & Highlights

Consolidated Financials (in Crs)
  Q4FY22 Q4FY21 YoY % Q3FY22 QoQ % FY22 FY21 YoY%
Sales 806 834 -3.4% 620 30.0% 2735 2342 16.8%
PBT 114 153 -25.5% 67 70.1% 404 333 21.3%
PAT 73 100 -27.0% 44 65.9% 263 214 22.9%

Detailed Results:

  1. The company saw a weak quarter with revenue decreasing by 3% while PAT decreasing by 27% on YoY basis.
  2. Net debt stands at Rs.260-270 Cr.
  3. EBIDTA decreased by 24% YoY & increased by 29% on a QoQ basis.

 

Investor Conference Call Highlights

  1. The company saw YoY decline in its current quarter’s performance due to higher base of previous year coupled with several headwinds in the current quarter.
  2. The management states that it is declining several orders recently due to pricing issues in the market & considering the replacement cost of coal, they believe it would be prudent to not accept these orders.
  3. The company’s strategy of being selective about its customers has led to lower volumes but at higher profit margins.
  4. The volume rise for FY22 stood at 8% YoY.
  5. EBIDTA per ton for Q4 stood at around Rs.950 while that for FY22 stood at Rs.1100 which is a decrease of Rs.20 on a YoY basis.
  6. The management states that the company’s premium product – “ Strongcrete “ saw healthy growth of 64% YoY while its contribution to total B2C sales stood at 14%.
  7. The company’s blended cement sales as a % of total sales has been close to 63%.
  8. The company’s B2B:B2C sales mix is close to 40:60.
  9. The company’s geographical wise sales mix stood as 53% in West, 37% in South and the rest 10%, largely in Central India.
  10. The company has dispatched 25% of its material using railways in a bid to optimize freight & logistics cost.
  11. The fuel mix for Q4 stood as AFR 17%, domestic coal 51%, pet coke 24% and imported coal at about 8%.
  12. The management states that some components of AFR are available to company at negative costs like liquid hazardous waste because it has invested money into creating the infrastructure, which can handle this liquid hazardous waste.
  13. The management states that it is completely on track to commission the enhanced Brownfield capacity at Devapur and a grinding unit at the Tiroda power plant of Adanis & expects both these project to be up & running by FY24.
  14. The company will incur capex of Rs.750 Cr in FY22.
  15. The company plans to commission its 10 MW WHRS plant by the end of FY23. 

 

Analyst’s View

Orient Cement is a leading cement maker in the West and South Zones. The company had a tepid Q4 which saw revenues decline 3.4% YoY while profits fell 27% YoY due to difficulty in raising selling prices and input cost inflation. The company is set on its capex plans with which it expects to increase capacity in 2024. It has also seen good response to its premium offering. It remains to be seen how will the ongoing consolidation in the cement industry and the entry of Adani in the sector affect smaller players like Orient and whether the company’s future plans will pan out according to expectations. Nonetheless, given its strong position in its native zones, and its good EBITDA/ton, Orient Cement is a good small cap cement stock to watch out for.