ACC (Q3 CY12) – Market Performer

India Infoline News Service | Mumbai |

Improvement in realization drives 10% yoy rise in to Rs24.7bn (marginally below our estimate of Rs25.1bn)

CMP Rs1,420, Target Rs1,516, Upside 6.2%

Improvement in realization drives 10% yoy rise in to Rs24.7bn (marginally below our estimate of Rs25.1bn)
Volumes decline as heavy monsoon in August and September impacts demand
Higher than expected rise in operating costs restrict margin expansion
PAT grew 48% yoy, lower than our estimate
Maintain Market Performer with 9-mth price target of Rs1,516

Result table*
(Rs mn) Q3 CY12 Q3 CY11 % yoy Q2 CY12 % qoq
Net sales 24,739 22,487 10.0 28,154 (12.1)
Material costs 3,061 3,840 (20.3) 3,016 1.5
Personnel costs 1,405 1,382 1.6 1,356 3.6
Power and fuel costs 5,666 5,524 2.6 6,038 (6.2)
Freight cost 4,877 3,329 46.5 5,743 (15.1)
Other overheads 5,086 5,221 (2.6) 5,116 (0.6)
Operating profit 4,644 3,191 45.5 6,885 (32.5)
OPM (%) 18.8 14.2 458 bps 24.5 (568 bps)
Depreciation (1,352) (1,199) 12.7 (1,356) (0.3)
Interest (257) (253) 1.6 (301) (14.4)
Other income 546 574 (4.8) 782 (30.1)
PBT 3,581 2,313 54.8 6,010 (40.4)
Tax (1,094) (637) 71.8 (1,829) (40.2)
Effective tax rate (%) 30.6 27.5 11.0 30.4 0.4
Adjusted PAT 2,487 1,676 48.4 4,180 (40.5)
Adj. PAT margin (%) 10.1 7.5 260 bps 14.8 (480 bps)
Reported PAT 2,487 1,676 48.4 4,180 (40.5)
Ann. EPS (Rs) 52.9 35.7   48.4 89.0   (40.5)
Source: Company, India Infoline Research,  * Standalone

Improvement in realisation overshadows drop in volumes
ACC revenues grew 10% yoy to Rs24.7bn, lower than our estimate of Rs25.1bn. Realization came in better than expected at 12.5% yoy and a drop of 1.5% qoq (against our expectation of -3% qoq). Cement volumes declined by 4.5% yoy despite an increase in capacity, as A) revival in monsoon during August and September resulted in sluggish demand and B) company could have opted for regular maintenance shutdown.

Higher than expected rise in cost restrict margin expansion
Operating margins for ACC expanded by 460bps yoy as against our estimate of 600bps improvement. The operating performance was lower than our estimate primarily on account of power and fuel expenses, which stood at 1,043/ton (all-time high) despite a fall in international coal prices. Freight cost was lower than our estimate.

Weak topline coupled with poor operating performance translated into PAT growth of 48% yoy as against our expectation of 75% yoy growth. Expansion at Wadi and Chanda plant led to ~13% jump in depreciation for the quarter. Effective tax rate stood at 30.6% as against 27.5% during same quarter previous year.

Trades at Fair valuation; Maintain Market Performer rating
ACC has not announced any significant capex plans in the last three years despite a strong balance sheet and improving outlook. Recent acquisition has not been significant to boost volume growth beyond CY14. We believe a drop in market share will prompt ACC to look for more inorganic growth opportunities.

ACC CY14 OPM is likely to increase 270bps owing to cost reduction initiatives the company has undertaken over the previous year. We project earnings CAGR of 14% over CY12-14 and believe stock trades close to its fair value at CY14 EV/ton of US$157, 7.4x EV/EBIDTA and 14x PE. We maintain our Market Performer rating with a revised 9-mth target price of Rs1,516.

Financial Summary
Y/e 31 Mar (Rs m) CY11 CY12E CY13E CY14E
Revenues 96,603 109,968 124,455 138,207
Yoy growth (%) 25.2 13.8 13.2 11.0
Operating profit 19,207 23,602 29,403 33,340
OPM (%) 19.9 21.5 23.6 24.1
Pre-exceptional PAT 13,253 14,447 17,110 18,997
Reported PAT 13,253 11,093 17,110 18,997
Yoy growth (%) 18.3 (16.3) 54.2 11.0





EPS (Rs) 70.5 76.9 91.0 101.1
P/E (x) 20.1 18.5 15.6 14.0
Price/Book (x) 3.7 3.4 3.0 2.4
EV/EBITDA (x) 13.3 10.9 8.6 7.4
Debt/Equity (x) 0.1 0.1 0.1 0.1
RoE (%) 19.4 19.3 20.4 19.1
RoCE (%) 21.0 24.0 26.5 24.9
Source: Company, India Infoline Research

BSE 1,698.65 8.75 (0.52%)
NSE 1,696.50 8.30 (0.49%)

***Note: This is a NSE Chart

 

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