ACC Ltd - Result Update - ICICI Securities

ACC Ltd surprised positively with margin expansion of 313 bps YoY leading to better profitability during Q2CY20. While revenues, volumes declined, they were broadly in line with our estimates. Sales volumes declined 33.7% YoY to 4.8 MT (in line with I-direct estimate: 4.85 MT) due to the Covid-19 induced nationwide lockdown. RMC volumes also declined sharply by 83% YoY to 0.15 million. Sales realisations dipped 3.3% YoY to Rs. 5421/tonne (vs. I-direct estimate: Rs. 5383/t). As a result, operating revenue for the quarter de-grew 36% YoY to Rs. 2602 crore (vs. I-direct estimate: Rs. 2611.3 crore). Despite low volume offtake, margins for the quarter improved 313 bps YoY to 20.2% (vs. I-direct estimate: 13.4%). EBITDA/t for the quarter was at Rs. 1095/tonne (vs. I-direct estimate: Rs. 719/tonne), up 14.4% YoY. Better operating performance led the company to report net profit of Rs. 271 crore, far ahead of our estimated net profit of Rs. 167 crore.

Valuation & Outlook

While this quarterly performance remained healthy on the margins front, the structural issues with respect to CoP need to be addressed for sustenance of healthy margins in the long run. On the positive side, strong B/S and improved cash flow remain key positives. Post the recent rally in the stock price, we now downgrade the stock to HOLD with a revised target price of Rs. 1,450/share (valuing at 10x CY21E EV/EBITDA implying an EV/t of ~$85).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_ACC_Q2CY20.pdf

Shares of ACC LTD. was last trading in BSE at Rs.1382.75 as compared to the previous close of Rs. 1330.05. The total number of shares traded during the day was 167260 in over 11478 trades.

The stock hit an intraday high of Rs. 1422.95 and intraday low of 1364.05. The net turnover during the day was Rs. 233183161.

Source : Equity Bulls

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