Stock Views on USTAN ZINC, AMBUJA CEMENT

RELIGARE on AMBUJA CEMENT

Religare maintains `Buy' rating on Ambuja Cement. Ambuja Cement's Q3CY10 results were below the estimates. While topline declined by 2.9%, the EBITDA margin contracted 919 bps on lower realisations and higher power and fuel costs. As a result, EBITDA/tonne dropped to 647 for the quarter from 1068 in Q3CY09. Religare expects the company to record better volume growth and higher realisations going forward. Rolling forward to September '11, Religare has revised the target price of 165. Topline dips 2.9% y-o-y. The company's EBITDA margin plummeted 919 bps to 18% y-o-y on account of higher power and fuel costs and other expenses. Increased clinker production coupled with higher coal costs pushed up power costs by 233/t y-o-y. Further, other expenditure increased mainly on account of higher maintenance expenses. This translated into an EBITDA/t of 647 for the quarter. Religare has pared the earnings estimates for CY10/CY11 by 2.7%/ 3.5% to build in the below-expected performance. Religare maintains the `Buy' rating on ACEM and believes the company's worst quarter, in terms of performance, is over and expects better earnings going forward.

ICICI DIRECT on HINDUSTAN ZINC

Hindustan Zinc posted a good set of numbers for Q1FY11. The topline came at about 2,201 crore against the expectation of about 1,973 crore posting a y-o-y and q-o-q growth of 21% and about 12% respectively. This was on the back of a substantial rise in average realisations due to higher LME prices. The bottomline grew 1.5% and 6.5% y-o-y and q-o-q respectively, to about 949 crore compared to the estimate of 838 crore. Despite negative interest costs, higher depreciation dented the PAT margin. Expansion projects of the company are on track and would help volume growth, going forward. A sharp fall in the US dollar helped base metals prices to see a substantial jump in the past three or four months. On the back of this, HZL's realisations for zinc in Q2FY11 rose 3% and 8% q-o-q and y-o-y respectively. Total zinc and lead sales volumes also rose by 25% and 6%, respectively y-o-y and q-o-q mainly due to the 39,000-tonne contribution from the newly commissioned 210-ktpa zinc smelter at Dariba. The company expects its 100-ktpa lead smelter to be commissioned during Q3FY11E.