ACC (Q4 CY12)

India Infoline News Service | Mumbai |

Maintain BUY with 9-mth price target of Rs1,514

CMP Rs1,344, Target Rs1,514, Upside 12.6%
  • Amalgamation of RMC division translates into a 24.4% jump in topline; grey cement numbers disappoints
  • Volumes remain flat yoy as festive season interrupts demand
  • Jump in RM cost (on inclusion of RMC operation) drags OPM by ~5ppts
  • PAT de-grew by 4% yoy, lower than our estimate
  • Maintain BUY with 9-mth price target of Rs1,514
Result table*
(Rs mn) Q3 CY12 Q3 CY11 % yoy Q2 CY12 % qoq
Net sales 31,796 25,552 24.4 24,739 28.5
Material costs 7,943 4,221 88.2 3,061 159.5
Personnel costs 2,084 1,555 34.0 1,405 48.3
Power and fuel costs 5,355 5,836 (8.3) 5,666 (5.5)
Freight cost 6,057 3,764 60.9 4,877 24.2
Other overheads 6,379 5,757 10.8 5,086 25.4
Operating profit 3,979 4,418 (9.9) 4,644 (14.3)
OPM (%) 12.5 17.3 (478 bps) 18.8 (626 bps)
Depreciation (1,575) (1,270) 24.0 (1,352) 16.5
Interest (273) (192) 42.2 (257) 6.1
Other income 661 458 44.4 546 21.0
PBT 2,792 3,414 (18.2) 3,581 (22.0)
Tax (400) 1,291 (131.0) (1,094) (63.5)
Effective tax rate (%) 14.3 (37.8) (137.8) 30.6 (53.2)
Adjusted PAT 2,392 4,704 (49.1) 2,487 (3.8)
Adj. PAT margin (%) 7.5 18.4 (1089 bps) 10.1 (253 bps)
Reported PAT 2,392 4,704 (49.1) 2,487 (3.8)
Ann. EPS (Rs) 50.9 100.1   (49.1) 52.9   (3.8)
Source: Company, India Infoline Research,*Standalone

RMC unit amalgamation drives top-line; Results not comparable
ACC revenues grew 24.4% yoy to Rs31.8bn primarily due to amalgamation of wholly-owned subsidiaries (ACC Concrete and Encore Cement and Additives) in Oct’12 with effective date of 1st Jan 2012. On cement front, sales stood at Rs26.5bn lower than our estimate of Rs28.0bn. The disappointment was largely on the back of lower cement dispatches, which remained flat, against our expectation of a 5% increase. Realization improved by 8.3% yoy but dropped 1.6% qoq (against our expectations of -2% qoq).

RMC amalgamation translates into higher RM cost
Operating margins for ACC contracted by ~5ppts yoy as against our estimate of 150bps improvement. The operating performance was lower than our estimate primarily on account of RM cost, which was higher on account of amalgamation. Power and fuel cost was lower than our estimate boosted by subdued international coal prices.

PAT stood at Rs2.3bn, a drop of 49% yoy (against our expectation of 37% yoy decline) as tax adjustment boosted PAT in Q4 CY11. Depreciation stood at Rs1.57bn (higher-than our estimate) due to addition of RMC division.

Valuation appear appealing at 11.5x FY14E; Recommend BUY
ACC balance sheet continues to be strong with cash and cash equivalent at Rs30bn. Return ratios, which were on a declining mode, has now started to show up-tick and is expected to rise further in CY13 and CY14. Debt/equity continues to remain low as most of the recent expansion has been funded through internal accruals. Despite a strong balance sheet, ACC trades at a discount compared to its peers like Ultratech on EV/ton basis. We believe current valuations leave enough room for upside and recommend BUY for a 9-month target of Rs1,514.

Financial Summary
Y/e 31 Mar (Rs m) CY11 CY12E CY13E CY14E
Revenues 96,603 113,579 129,808 145,013
Yoy growth (%) 25.2 17.6 14.3 11.7
Operating profit 19,207 21,957 28,296 36,875
OPM (%) 19.9 19.3 21.8 25.4
Pre-exceptional PAT 13,253 13,968 16,181 21,894
Reported PAT 13,253 10,614 16,181 21,894
Yoy growth (%) 18.3 (19.9) 52.5 35.3





EPS (Rs) 70.5 74.3 86.1 116.5
P/E (x) 18.9 18.0 15.5 11.5
Price/Book (x) 3.5 3.4 3.0 2.5
EV/EBITDA (x) 12.7 11.4 9.1 7.0
Debt/Equity (x) 0.1 0.1 0.1 0.1
RoE (%) 19.4 19.2 20.4 23.4
RoCE (%) 20.4 22.1 26.9 30.0
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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