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| India Infoline Research Team / 12:48 , Jul 29, 2011 |
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- Revenues grew 4.8%, above our estimate on account of higher realizations
- Surge in power and fuel cost pulls down OPM by 350bps yoy
- Reported PAT below estimates; down 11.2% yoy
- Upgrade to Market Performer with a 9-mth TP of Rs123
Result table
| (Rs m) |
Q2 CY11 |
Q2 CY10 |
% yoy |
Q1 CY11 |
% qoq |
| Net sales |
21,891 |
20,884 |
4.8 |
22,225 |
(1.5) |
| Material costs |
262 |
829 |
(68.4) |
1,283 |
(79.6) |
| Personnel costs |
1,099 |
901 |
22.0 |
946 |
16.2 |
| Power and fuel costs |
5,633 |
4,534 |
24.2 |
4,816 |
17.0 |
| Freight cost |
4,980 |
4,474 |
11.3 |
5,086 |
(2.1) |
| Other overheads |
3,932 |
3,706 |
6.1 |
3,823 |
2.8 |
| Operating profit |
5,984 |
6,440 |
(7.1) |
6,270 |
(4.6) |
| OPM (%) |
27.3 |
30.8 |
(350) bps |
28.2 |
(87) bps |
| Depreciation |
(1,074) |
(1,001) |
7.3 |
(1,061) |
1.2 |
| Interest |
(152) |
(81) |
87.5 |
(138) |
10.2 |
| Other income |
562 |
259 |
116.7 |
521 |
7.8 |
| PBT |
5,320 |
5,618 |
(5.3) |
5,592 |
(4.9) |
| Tax |
(1,845) |
(1,705) |
8.2 |
(1,517) |
21.6 |
| Effective tax rate (%) |
34.7 |
30.4 |
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27.1 |
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| Reported PAT |
3,475 |
3,912 |
(11.2) |
4,075 |
(14.7) |
| Adj. PAT margin (%) |
15.9 |
18.7 |
(286) bps |
18.3 |
(246) bps |
| Ann. EPS (Rs) |
9.0 |
10.2 |
(11.2) |
10.6 |
(14.7) | Source: Company, India Infoline Research
Higher realization translates in to 4.8% revenue growth
ACL revenues grew 4.8% yoy to Rs21.9bn, despite of a 2.4% drop in cement volumes this quarter. Surprisingly, average realization for the quarter stood at Rs4,108/ton (up 5% sequentially and 8.5% yoy). The price rise was despite low off take in infra and construction activities. We reckon volume de-grow of 2.4% yoy could be due to maintenance shutdowns. ACL commissioned 0.9mtpa cement mill at its Chandrapur during the quarter.
Higher power and fuel cost impact margins
OPM contracted by 350bps yoy to 27.3%, below our estimate of 29%. Lower than expected operating performance was on account of surge in power and fuel cost (Rs1,065/ton against Rs838/ton a year ago) on back of 30% increase in linkage coal prices. In addition, we believe inventory pile up of coal could be one of the reasons for high power and fuel cost. Adjusted for inventory, lower RM cost helped cushion operating margins.
Cost Analysis
|
Q2 CY11 |
Q2 CY10 |
% yoy |
Q1 CY11 |
% qoq |
| Material costs |
1.2 |
4.0 |
(277) |
5.8 |
(458) |
| Personnel costs |
5.0 |
4.3 |
71 |
4.3 |
76 |
| Power and fuel costs |
25.7 |
21.7 |
402 |
21.7 |
406 |
| Freight cost |
22.7 |
21.4 |
132 |
22.9 |
(14) |
| Other overheads |
18.0 |
17.7 |
22 |
17.2 |
76 |
| Total costs |
72.7 |
69.2 |
350 |
71.8 |
87 | Source: Company, India Infoline Research
PAT below estimates, down 11.2% yoy
Reported PAT stood at Rs3.5bn against our estimates of Rs3.8bn. Effective tax rate was higher at 34.7% as against 27.1% in Q1 CY11.
Upgrade to Market performer
We revise up our earnings estimates as we factor in higher realizations (an increase of 4% from our previous assumption). We forecast earnings CAGR of 13.5% over CY10-12 against our previous estimate of 11%. Upgrade ACL to Market Performer but maintain our 9-mth TP of Rs123.
Financial summary
| Y/e 31 Mar (Rs m) |
CY09 |
CY10 |
CY11E |
CY12E |
| Revenues |
72,008 |
75,289 |
89,443 |
95,922 |
| yoy growth (%) |
13.8 |
4.6 |
18.8 |
7.2 |
| Operating profit |
19,715 |
19,510 |
24,376 |
25,626 |
| OPM (%) |
27.4 |
25.9 |
27.3 |
26.7 |
| Pre-exceptional PAT |
12,181 |
12,371 |
14,474 |
15,924 |
| Reported PAT |
12,181 |
12,636 |
14,474 |
15,924 |
| yoy growth (%) |
(12.4) |
3.7 |
14.5 |
10.0 |
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| EPS (Rs) |
8.0 |
8.0 |
9.3 |
10.2 |
| P/E (x) |
16.7 |
16.5 |
14.3 |
13.0 |
| Price/Book (x) |
3.1 |
2.8 |
2.5 |
2.2 |
| EV/EBITDA (x) |
9.9 |
9.6 |
7.7 |
7.1 |
| Debt/Equity (x) |
0.0 |
0.0 |
0.0 |
0.0 |
| RoE (%) |
20.1 |
17.9 |
18.5 |
17.8 |
| RoCE (%) |
27.1 |
22.4 |
25.7 |
23.9 | Source: Company, India Infoline Research
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