ACC - No surprises; maintain Sell - BRICS

ACC's earnings were largeley in line with adjusted PAT at Rs.3.90 billion against our estimates of Rs.3.99 billion. Revenue grew 19% aided by both volumes and realisations. However, margins saw a moderate 157 bps fall yoy to 21.5% as higher realisations were unable to offset the impact of rising fuel and freight costs.

While ACC could benefit from unutilised capacities in CY12, we feel the impending oversupply scenario will continue to cause volatile prices in the medium term, given moderate demand.

ACC's valuation at an EV/tonne of US$150 is expensive. The sector continues to see a downturn and consequently, prices are likely to remain volatile till the end of FY14. Given the weak sector fundamentals and rising costs, the current premium to ACC's replacement cost of US$120 is not justified. Maintain Sell.

Source : Equity Bulls

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