ACC - 1QCY2012 Result Update - Angel Broking

ACC's 1QCY2012 net profit fell by 55.7% yoy to Rs.155cr on account of a Rs.335cr one-time depreciation charge due to change in the method of providing depreciation on captive power plants from straight line to written down value method with retrospective effect. The company's operational performance was in-line with our estimates. ACC reported 19.3% yoy growth in its net sales to Rs.2,860cr, on account of 9.1% growth in cement volumes coupled with 9.3% growth in realizations. However, OPM declined by 162bp yoy to 22.5% primarily on account of increased coal and freight costs. At current levels, we maintain our Neutral view on the stock.

OPM down 162bp yoy at 22.5%, impacted by cost pressures: Although ACC's realizations rose by 9.3% yoy (1.2% qoq) during 1QCY2012, the company posted a 162bp yoy decline in its OPM to 22.5%. The company, which predominantly uses domestic coal, witnessed a steep 29.6% yoy increase in its per tonne power and fuel costs (on a low base) due to the substantial 30% price hike carried out by Coal India in March 2011. Per tonne freight costs also rose by 13.6% yoy due to higher diesel prices and freight hike carried out by railways during the quarter.

Outlook and valuation: We expect ACC to register 14.8% yoy growth in its top line over CY2011-13E, aided by higher volume and realization. The bottom line is expected to post a CAGR of 7.3%. At current levels, the stock is trading at EV/tonne of US$128 on CY2012E capacity (US$121 on CY2013E capacity), which in our view is fair. Hence, we continue to remain Neutral on the stock.

Source : Equity Bulls

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