ACC - Q1CY22 Result Update - In-line performance; Earnings to remain under pressure

Mr. Kamlesh Bagmar, Deputy Head of Research at Prabhudas Lilladher

Quick Pointers:

- Commissioning of greenfield plant of 2.7mnt clinker/1.0mnt grinding capacity at Ametha, MP on schedule for commissioning in Q4CY22

- Waste heat recovery (WHR) capacity to increase to 75MW (current 7.5MW) after commissioning of ongoing expansion at Jamul and Kymore plants and recently approved projects at Chanda and Wadi plants

ACC reported Q1CY22 earnings in line with our and consensus estimates (CE). EBITDA declined 26% YoY at Rs6.35bn (PLe:Rs6.30bn, CE:Rs6.47bn) due to 3%/24% fall in volumes/margins.

ACC narrowed the gap on margins with peers over last couple of years on back of visible reduction in manufacturing costs and higher operational efficiencies under program 'Parvat', complemented by rationalisation of logistics costs through Master supply agreement (MSA) with Ambuja cement. However, the scope for further reduction in costs remain limited as majority of levers are already captured in current cost dynamics, except reduction in power costs on account of upcoming WHR plants. In spite of slow pace of price hikes and sharp increase in costs, we continue to like ACC on back of attractive valuations and upcoming capacity addition of 5mnt in one of its most profitable and growing region, Central region. Maintain BUY with TP of Rs2,300 based on EV/EBITDA of 12x CY23e.

- Cement volumes in line with expectation: Due to weak demand across its regions, ACC's volumes fell 3% YoY to 7.7mnt (PLe:7.7mnt). While, Ready Mix concrete (RMC) volumes grew 5% YoY (+19% QoQ) at 0.87mn cu meter.

- Muted increase in realisations: Blended realisations increased 1.5% QoQ/6% YoY at Rs5,606, below our estimate of Rs5,640 due to lower than expected cement realisations. Cement realisations came below our estimates at Rs5,185 (PLe:Rs5,220), up 0.4% QoQ/6% YoY. While, RMC revenues grew 10% YoY at Rs4.0bn against our estimate of Rs3.9bn.

- Sharp increase in energy and raw material costs dented margins: Cement cost increased 14% YoY to Rs4,482/t (PLe:Rs4,500) due to 32% YoY/14% YoY rise in Power & Fuel/Raw material cost at Rs1,323/Rs627. The increase in these two major cost items was partially negated by 1% fall in freight cost at Rs1,293/t. Due to incommensurate increase in realisations compared to escalation in costs, EBITDA/t fell 24% YoY at Rs823 (PLe:Rs813). Aided by higher other income and lower tax rate, PAT came above our estimate at Rs3.96bn (PLe:Rs3.74bn, CE:Rs3.85bn), down 30% YoY.

Shares of ACC Limited was last trading in BSE at Rs. 2207.40 as compared to the previous close of Rs. 2057.90. The total number of shares traded during the day was 102649 in over 8755 trades.

The stock hit an intraday high of Rs. 2219.85 and intraday low of 2063.00. The net turnover during the day was Rs. 221644841.00.

Source : Equity Bulls

Keywords

ACC INE012A01025 Q1CY22 ResultUpdate PrabhudasLilladher