ACC - Higher Operating cost leads to weak earnings - quant

ACC (ACC IN) reported an adjusted PAT of Rs2.4 bn in 3Q CY12, lower than our estimate of Rs3.9 bn and consensus estimate of Rs2.8 bn, owing to higher-than estimated operating cost.

- Revenue at Rs25.5 bn was up 12%, primarily driven by 21.6% y-y growth in realization. Cement volume declined by 5.1% y-y, partly due to high base of the past year. Operating cost per MT came in at Rs3,926, up 8.2% y-y, which is the highest-ever reported by the company. We maintain our earnings estimates for CY12 and CY13 and introduce CY14 estimates with revenue of Rs152.5 bn and PAT of Rs19.7 bn.

- Although there is relative improvement in the outlook of cement companies based on improved pricing discipline, we reiterate SELL based on expensive valuations of 9.6x CY13E EV/EBITDA. We continue to value ACC on 7.0x CY13E EV/EBITDA and a PT of Rs1,019. Our PT implies 28.2% potential downside from the current levels.

Source : Equity Bulls

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