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| India Infoline Research Team / 12:45 , Feb 10, 2012 |
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CMP Rs178, Target Rs148, Downside 20.2%
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Revenuesgrew by 29%, above our estimate on account of higher realizations
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Surgein RM and freight cost pulls down OPM by 24bps yoy
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Lowereffective tax rate drives 76% qoq jump in PAT
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YTDrally leaves little valuation headroom and we downgrade to SELL with a revised9-mth tgt of Rs148
Resulttable
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(Rs m) |
Q4 CY11 |
Q4 CY10 |
% yoy |
Q3 CY11 |
% qoq |
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Net sales |
23,577 |
18,274 |
29.0 |
18,337 |
28.6 |
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Material costs |
3,357 |
1,653 |
103.0 |
1,442 |
132.8 |
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Personnel costs |
1,255 |
775 |
61.9 |
1,032 |
21.5 |
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Power and fuel costs |
4,714 |
4,461 |
5.7 |
4,950 |
(4.8) |
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Freight cost |
5,074 |
4,080 |
24.4 |
4,161 |
21.9 |
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Other overheads |
4,681 |
3,776 |
24.0 |
3,558 |
31.6 |
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Operating profit |
4,496 |
3,529 |
27.4 |
3,194 |
40.8 |
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OPM (%) |
19.1 |
19.3 |
(24) bps |
17.4 |
165 bps |
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Depreciation |
(1,238) |
(1,086) |
14.0 |
(1,079) |
14.8 |
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Interest |
(99) |
(209) |
(52.8) |
(138) |
(28.5) |
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Other income |
651 |
378 |
72.1 |
571 |
14.0 |
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PBT |
3,811 |
2,612 |
45.9 |
2,548 |
49.5 |
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Tax |
(544) |
(102) |
433.5 |
(834) |
(34.7) |
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Effective tax rate (%) |
14.3 |
3.9 |
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32.7 |
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Adjusted PAT |
3,266 |
2,510 |
30.1 |
1,715 |
90.5 |
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Adj. PAT margin (%) |
13.9 |
13.7 |
12 bps |
9.4 |
450 bps |
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Extra ordinary items |
(243) |
65 |
(476.0) |
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- |
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Reported PAT |
3,024 |
2,575 |
17.4 |
1,715 |
76.3 |
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Ann. EPS (Rs) |
8.5 |
6.5 |
30.1 |
4.5 |
90.5 |
Source: Company, India InfolineResearch
Higherrealization translate into 29% revenue growth
ACL revenuesgrew by 29% yoy to Rs23.5bn, above our expectation of Rs21.3bn. Theoutperformance was mainly on account of higher realizations (18.4% yoy and 7.7%qoq). Buoyant cement demand in North, Central and Eastern regions (60% of ACLmarket) led to a sharp increase in cement prices during the quarter. Netrealization stood at Rs4,204/ton, above our estimate of Rs4,012/ton. Volumegrowth of 10% was in line with estimate.
Higher RM andfreight costs cause margin contraction
OPM contractedby 24bps yoy to 19.1%, vs our estimate of 23%. Margin disappointment was onaccount of surge in adjusted raw material cost (Rs606/ton against Rs260/ton ayear ago). Freight cost increased by 24.4% yoy on back of higher fuel cost.
Power and fuelcost was lower-than estimated as we believe that ACL may have used lower levelcoal inventory during the quarter, thereby arresting further slide at PBIDTlevel.
Cost Analysis
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Q4 CY11 |
Q4 CY10 |
% yoy |
Q3 CY11 |
% qoq |
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Material costs |
14.2 |
9.0 |
519 |
7.9 |
638 |
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Personnel costs |
5.3 |
4.2 |
108 |
5.6 |
(31) |
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Power and fuel costs |
20.0 |
24.4 |
(442) |
27.0 |
(700) |
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Freight cost |
21.5 |
22.3 |
(80) |
22.7 |
(117) |
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Other overheads |
19.9 |
20.7 |
(81) |
19.4 |
45 |
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Total costs |
80.9 |
80.7 |
24 |
82.6 |
(165) |
Source: Company, India Infoline Research
Lower taxoutgo result into a 30% jump in PAT
Reported PATstood at Rs3bn against our estimate of Rs2.6bn. Core earnings was above ourestimate 1) higher than estimated topline and 2) lower tax outgo (effective taxrate stood at 14.3% as against 32.% reported in Q3 CY11). Lower interest cost(down 53% yoy and 28.5% qoq) further boosted PAT.
Expensive at 15.6x CY13E; downgrade to SELL
We tweak our earning estimates upwards for ACL aswe factor in higher realization (an increase of 4% from our previous estimate).We project earnings CAGR of 13.5% over CY10-12 against our previous estimate of11%. However, recent run-up in stock price (up 15% ytd) is likely to limit anyupside from current level, and accordingly we downgrade the stock to SELL witha revised 9-mth tgt to Rs148.
Financial summary
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Y/e 31 Mar (Rs m) |
CY10 |
CY11E |
CY12E |
CY13E |
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Revenues |
75,289 |
86,196 |
98,940 |
100,281 |
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yoy growth (%) |
4.6 |
14.5 |
14.8 |
1.4 |
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Operating profit |
19,510 |
19,969 |
26,598 |
28,552 |
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OPM (%) |
25.9 |
23.2 |
26.9 |
28.5 |
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Pre-exceptional PAT |
12,371 |
12,538 |
16,605 |
17,728 |
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Reported PAT |
12,636 |
12,298 |
16,605 |
17,728 |
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yoy growth (%) |
3.7 |
(2.7) |
35.0 |
6.8 |
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EPS (Rs) |
8.0 |
8.0 |
10.7 |
11.4 |
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P/E (x) |
22.0 |
22.0 |
16.6 |
15.6 |
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Price/Book (x) |
3.7 |
3.4 |
3.0 |
2.5 |
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EV/EBITDA (x) |
13.1 |
12.9 |
9.5 |
8.4 |
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Debt/Equity (x) |
0.0 |
0.0 |
0.0 |
0.0 |
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RoE (%) |
17.9 |
16.2 |
19.0 |
17.3 |
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RoCE (%) |
22.4 |
21.4 |
25.4 |
23.4 |
Source:Company, India Infoline Research
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