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ACC Ltd Research Report - 21st Jan 2016

Cement | Published on Oct 27th 2015


ACC’s net sales during 3QCY2015 remained flat yoy at Rs2,740cr, but were above our expectation of Rs2,686cr. Volumes declined by 0.2% yoy to 5.61mt (vs our expectation of 5.56mt); and realization/tonne declined by 1.8% yoy to Rs4,438 (in line with our estimate of Rs4,429), mainly due to muted demand for cement. The EBITDA at Rs313.6cr has come in above our estimate of Rs244.8cr on account of cost efficiency measures followed by the company in terms of incurring lower power and employee costs. Hence, the EBIDTA margin for the quarter, at 11.4%, is also above our expectation of 9.1%. The net profit saw a decline of 42.9% yoy to Rs117cr, weighed down by lower other income. EBITDA margin dips 236bp yoy to 11.4%: For 3QCY2015, ACC reported an EBITDA of Rs313.6cr, a decrease of 17.2% yoy, but is above our estimate of Rs244.8cr. The EBITDA came in higher than our estimate, led by lower power and employee costs. The total operating cost increased by 1.7% yoy to Rs2,476.2cr, led by 5.1% and 11.9% yoy increase in net raw material and other expenses, respectively. The EBITDA margin fell by 236bp yoy to 11.4%; the same is above our expectation of 9.1%. Strong RMC sales and a modest increase in operating costs delivered the better than expected EBIDTA margin during the quarter. The EBITDA/tonne declined by 17% yoy to Rs559 but was ahead of our estimate of Rs440. Outlook and valuation: Going ahead, we expect ACC’s bottom-line to grow at a CAGR of 22.2% over CY2014-17E, considering capacity addition and operational efficiency post commissioning of new capacity in the east region. We have introduced estimates for CY2017E and recommend a Buy rating on the stock with a revised target price of Rs1,630 on 10x EV/EBIDTA and EV/tonne of US$120 on CY2017E installed capacity.

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CMP 1,397
Target Price 1,630
Investment Period12 Months

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Shareholding Pattern (%)

Public & Others14.0
Grand Total100.0

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