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| India Infoline Research Team / 12:27 , Feb 10, 2012 |
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CMP Rs1,389, Target Rs1,208, Downside 15.0%
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Revenue growth of 22% yoy exceeds estimate primarily drivenby higher realization; volumes in-line with expectation
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OPM expands by 100bps against an expectation of 270bps riseas international coal prices had softened.
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Maintain SELL on expensive valuation of 15x FY13E with 9-mthtgt of Rs1,208
Result table*
|
(Rs m) |
Q4 CY11 |
Q4 CY10 |
bps yoy |
Q3 CY11 |
bps qoq |
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Net sales |
25,552 |
20,889 |
22.3 |
22,487 |
13.6 |
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Material costs |
4,221 |
2,822 |
49.6 |
3,840 |
9.9 |
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Personnel costs |
1,555 |
1,486 |
4.6 |
1,382 |
12.5 |
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Power and fuel costs |
5,836 |
4,513 |
29.3 |
5,524 |
5.7 |
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Freight cost |
3,764 |
2,995 |
25.7 |
3,329 |
13.1 |
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Other overheads |
5,757 |
5,673 |
1.5 |
5,221 |
10.3 |
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Operating profit |
4,418 |
3,400 |
29.9 |
3,191 |
38.4 |
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OPM (%) |
17.3 |
16.3 |
101 bps |
14.2 |
310 bps |
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Depreciation |
(1,270) |
(1,119) |
13.5 |
(1,199) |
5.9 |
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Interest |
(192) |
(137) |
39.6 |
(253) |
(24.2) |
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Other income |
458 |
242 |
89.1 |
574 |
(20.2) |
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PBT |
3,414 |
2,386 |
43.1 |
2,313 |
47.6 |
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Tax |
1,291 |
173 |
646.5 |
(637) |
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Effective tax rate (%) |
- |
- |
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27.5 |
- |
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Adjusted PAT |
4,704 |
2,559 |
83.9 |
1,676 |
180.7 |
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Adj. PAT margin (%) |
18.4 |
12.2 |
616 bps |
7.5 |
1,096 bps |
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Reported PAT |
4,704 |
2,559 |
83.9 |
1,676 |
180.7 |
Source: Company, India Infoline Research
* Standalone
Higher realizationand surge in volumes drive topline
ACC reported revenue growth of 22% yoy to Rs25.5bn, aboveour estimate of Rs24bn. Outperformance was largely due to better than expectedcement realization (at Rs4,249/ton up 6.2% qoq) as company increased prices tocover the escalation in input cost. Volume growth of 5% yoy was on accountstabilization of new plants.
Going forward, we expect realization to remain stable tillQ1 CY12 on account of stable demand.
OPM expansion of100bps below estimate
Operating margin expanded by a lower 100bps yoy vs. ourexpectation of +270bps. The underperformance (vis-à-vis our expectation) waslargely due to increase in power and fuel, which stood at Rs991/ton despitesoftening of international coal prices (down 5% in Q3 CY11).
Other cost overheads were in-line with estimate with rawmaterial adjustment led to an increase of 49.6% yoy and 10% qoq basis.
Cost Analysis
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Q4 CY11 |
Q4 CY10 |
bps yoy |
Q3 CY11 |
bps qoq |
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Material costs |
14.1 |
13.5 |
59 |
17.1 |
(297) |
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Personnel costs |
5.9 |
7.1 |
(117) |
6.1 |
(21) |
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Power and fuel costs |
23.0 |
21.6 |
138 |
24.6 |
(158) |
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Freight cost |
14.1 |
14.3 |
(24) |
14.8 |
(70) |
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Other overheads |
23.9 |
27.2 |
(327) |
23.2 |
67 |
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Total costs |
81.0 |
83.7 |
(271) |
85.8 |
(480) |
Source: Company, India InfolineResearch
Higher tax credit boosts PAT
Reported PAT jumped by 83.9% yoy to Rs4.7bn. Taxcredit pertaining to earlier years resulted in a gross inflow of Rs2.3bn, whichtranslated into a net tax inflow of Rs1.3bn. Expansion at Wadi and Chanda plantsled to 13% jump in depreciation for the quarter. Interest outgo increased by40% yoy due to higher borrowing.
Maintain SELL; valuation expensive at 15x FY13E
After a weak CY10, ACC volumes are likely to grow10% in CY12, primarily on the back of stability in new plants and volume growthkicking in from acquisitions made in CY09.
We factor in margin improvement over the next twoyears given the easing of pressure on realization. However, given rich valuations,we maintain our SELL rating with a 9-mth price target of Rs1,208, valuing ACCat 13x CY13 EPS.
Financial summary
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Y/e 31 Mar (Rs m) |
CY10 |
CY11E |
CY12E |
CY13E |
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Revenues |
77,173 |
96,603 |
111,655 |
125,839 |
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yoy growth (%) |
(3.9) |
25.2 |
15.6 |
12.7 |
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Operating profit |
15,540 |
19,207 |
24,769 |
28,588 |
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OPM (%) |
20.1 |
19.9 |
22.2 |
22.7 |
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Pre-exceptional PAT |
11,200 |
13,590 |
15,113 |
17,466 |
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Reported PAT |
11,200 |
13,590 |
15,113 |
17,466 |
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yoy growth (%) |
(30.3) |
21.3 |
11.2 |
15.6 |
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EPS (Rs) |
59.6 |
72.3 |
80.4 |
92.9 |
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P/E (x) |
23.3 |
19.2 |
17.2 |
14.9 |
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Price/Book (x) |
4.0 |
3.6 |
3.0 |
2.5 |
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EV/EBITDA (x) |
16.4 |
13.1 |
9.9 |
8.6 |
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Debt/Equity (x) |
0.1 |
0.1 |
0.0 |
0.0 |
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RoE (%) |
17.9 |
19.7 |
18.7 |
18.0 |
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RoCE (%) |
21.3 |
21.3 |
24.7 |
24.1 |
Source:Company, India Infoline Research
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