Today's Top Gainer
| SYMBOL | CMP | Chg (%) |
|---|---|---|
Note:Top Gainer - Nifty 50 More
ACC (Q2 CY14)
ACC revenues grew 7%yoy to Rs30bn matching our estimates.
Jul 30, 2014 10:07 IST India Infoline News Service
CMP Rs1,432, Target Rs1,277, Downside 10.8%
Source: Company, India Infoline Research
Cost analysis
Financial Summary
Source: Company, India Infoline Research
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ACC topline grew 7%; meets our estimates. OPM stood at 14.7%; lower than our estimates on back of higher personnel and other overhead costs.
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PAT at Rs2.4bn (down 8%yoy) was lower than our estimates; savings in depreciation and interest outgo arrests further slide.
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Upgrade to Reduce with a revised 9-month price target of Rs1,334 on back of rolling over valuation to CY16 from CY15
| (Rs mn) | Q2 CY14 | Q2 CY13 | % yoy | Q1 CY14 | % qoq |
| Net sales | 30,595 | 28,511 | 7.3 | 30,269 | 1.1 |
| Material costs | 5,033 | 4,780 | 5.3 | 5,391 | (6.6) |
| Personnel costs | 1,936 | 1,725 | 12.2 | 1,694 | 14.3 |
| Power and fuel costs | 6,207 | 5,916 | 4.9 | 6,098 | 1.8 |
| Freight cost | 6,755 | 5,730 | 17.9 | 6,627 | 1.9 |
| Other overheads | 6,158 | 5,459 | 12.8 | 6,209 | (0.8) |
| Operating profit | 4,506 | 4,901 | (8.1) | 4,251 | 6.0 |
| OPM (%) | 14.7 | 17.2 | (246) bps | 14.0 | 68 bps |
| Depreciation | (1,377) | (1,411) | (2.4) | (1,390) | (0.9) |
| Interest | (111) | (179) | (37.8) | (108) | 2.7 |
| Other income | 371 | 354 | 4.6 | 1,079 | (65.7) |
| PBT | 3,388 | 3,666 | (7.6) | 3,832 | (11.6) |
| Tax | (978) | (1,090) | (10.3) | 136 | (820.1) |
| Effective tax rate (%) | 28.9 | 29.7 | (2.9) | (3.5) | (914.4) |
| Adjusted PAT | 2,410 | 2,576 | (6.4) | 3,968 | (39.3) |
| Adj. PAT margin (%) | 7.9 | 9.0 | (116) bps | 13.1 | (523) bps |
| Extra Ordinary | - | 43 | (100.0) | 32 | (100.0) |
| Reported PAT | 2,410 | 2,619 | (8.0) | 4,000 | (39.7) |
Price improvement in South translates into 7% yoy revenue jump
ACC revenues grew 7%yoy to Rs30bn matching our estimates. Realizations improved (up 4%qoq against our expectations of 3%qoq increase) primarily due to increase in cement prices in southern region. Dispatch volumes meet estimates at 6.35mtpa for the quarter.
Savings in power and other overhead offset lower yield
Operating margins for ACC stood at 14.7% a contraction of 246bps yoy; lower than our estimate of 90bps drop. Personnel cost stood at Rs305/ton (at 4 quarter high). Surge in freight cost (Rs1,064/ton as against Rs1,043/ton previous year and Rs1023/ton sequentially) on railway freight increase. Other overhead cost stood at Rs970/ton as against Rs892/ton sequentially.
Depreciation and interest outgo was lower on yearly basis. PAT stood at Rs2.4bn down 6%yoy.
Cost analysis
| As a % of net sales | Q2 CY14 | Q2 CY13 | % yoy | Q1 CY14 | % qoq |
| Material costs | 16.4 | 16.8 | (31) | 17.8 | (136) |
| Personnel Costs | 6.3 | 6.1 | 28 | 5.6 | 73 |
| Power and fuel costs | 20.3 | 20.8 | (46) | 20.1 | 14 |
| Freight cost | 22.1 | 20.1 | 198 | 21.9 | 19 |
| Other overheads | 20.1 | 19.1 | 98 | 20.5 | (38) |
| Total costs | 85.3 | 82.8 | 246 | 86.0 | (68) |
Trades at 20x PER CY15 earnings; downgrade to SELL
Cement prices did see an uptick in southern region boosting realization for ACC during the current quarter. However, we see a limited scope of realization staying at current levels in Southern region in the next few quarters.
ACC balance sheet continues to be strong with cash and cash equivalent at Rs26bn and almost zero debt. The on-going Jamul project is currently halfway through; management expects the project to come on stream by H1 CY15. Groundwork at Sindri, Jharkhand is also progressing well. ACC has rallied more than 45% in first half of the year. We see lot of positive being already build up in the stock with not much of a change in ground reality; even the quarterly results have failed to surprise us positively. We maintain our SELL rating on ACC but increase our 9-month PT to Rs1,277 from Rs1,173 on back of rolling over valuation to CY16 from CY15.
Financial Summary
| Y/e 31 Mar (Rs m) | CY13 | CY14E | CY15E | CY16E |
| Revenues | 111,643 | 123,967 | 142,726 | 159,447 |
| Yoy growth (%) | (1.7) | 11.0 | 15.1 | 11.7 |
| Operating profit | 16,300 | 18,589 | 24,360 | 29,192 |
| OPM (%) | 14.6 | 15.0 | 17.1 | 18.3 |
| Pre-exceptional PAT | 10,099 | 11,385 | 13,606 | 16,732 |
| Reported PAT | 10,099 | 11,385 | 13,606 | 16,732 |
| Yoy growth (%) | (41.6) | 12.7 | 19.5 | 23.0 |
| EPS (Rs) | 53.7 | 60.6 | 72.4 | 89.0 |
| P/E (x) | 26.6 | 23.6 | 19.8 | 16.1 |
| Price/Book (x) | 3.4 | 3.2 | 3.0 | 2.7 |
| EV/EBITDA (x) | 14.9 | 13.2 | 10.2 | 8.6 |
| Debt/Equity (x) | - | 0.0 | 0.1 | 0.1 |
| RoE (%) | 13.3 | 14.1 | 15.7 | 17.6 |
| RoCE (%) | 15.2 | 17.4 | 21.8 | 23.2 |
