ACC - Mixed bag - ElaraCapital

Higher other income boosts bottomline

ACC's EBITDA was ~9% lower than our estimates but net profit was ~3% higher due to higher than expected other income.Net sales for the quarter grew 1.8% YoY to INR29 bn. EBITDA for the quarter declined 27.5% YoY (up QoQ by 40.9%) to INR 4.5 bn. EBITDA margins fell by 620 bps YoY (up QoQ by 510 bps) to 15.3%. Net profit for the quarter declined by 22% due to higher other income.

EBIDTA per tonne improves 31% QoQ on lower costs

Realisations for the cement business fell by INR 62/tonne QoQ (1.4% QoQ) to INR 4,393/tonne. Cost per tonne declined by ~5.7% QoQ due to operating leverage. The EBITDA/tonne for Q1CY13 stood at INR 696/tonne as compared to INR 532 in previous quarter and INR 920 in last year.

Volumes up ~8% QoQ

Sales volume increased by 8% QoQ to 6.4mn tonnes. However, the same was down by 4.5% YoY as company has lost market share.

Capacity expansion of ~5 mn tonne by CY15

ACC is planning to increase its presence in the eastern markets by augmenting capacities by ~5 mn tonnes. The company is undertaking brownfield expansions at Sindri, Jharkhand (1.35mn tonne) and Jamul, Chattisgarh (1.1mn tonne) and greenfield expansion of 2.7mn tonnne at Kharagpur (West Bengal). It has commenced work on the above projects with placement of equipment orders and ground breaking at the site. The capacities will be commissioned in a phased manner by end of CY15.

Valuations

At the CMP of INR1,227 ACC is trading at EV/tonne of USD~121/tonne of CY14 capacities. The stock is trading at ~30% discount to Ambuja and ~15% discount to UltraTech. Hence, considering attractive relative valuations we maintain Accumulate rating on the stock with price target of INR1,365.

Source : Equity Bulls

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