Buy ACC Ltd - Motilal Oswal

ACC (ACC IN; Mkt Cap USD4.1b, CMP Rs986, Buy)

Volumes grew 4.7% YoY (~16% QoQ) to 5.61mt (in-line). Realizations improved 2.9% QoQ (declined ~2.7% YoY) to Rs3,490/ton (v/s estimate of Rs3,550/ton).

Net sales grew 2% YoY (~19.6% QoQ) to Rs19.6b (v/s our estimate of Rs20b). EBITDA grew 23% QoQ (declined ~56% YoY) to Rs2.09b

EBITDA margin expanded 20bp QoQ (declined ~14.2pp YoY) to 10.7%, impacted by higher fixed cost in the form of staff cost and other expenses.

The company declared final dividend of Rs20.5/share including Rs7.5/share as special Platinum Jubilee dividend (total of Rs30.5/share for CY10).

We downgrade our EPS estimates by 8.4% for CY11 and by 6.9% for CY12 to factor in robust pricing environment, which is more than negated by higher cost push. The stock is valued at 17.4x CY11E EPS, and an EV of 9.1x CY11E EBITDA and US$111/ton (~30m ton capacity). Maintain Buy with a target price of Rs1,066 (~10x CY11E EV/EBITDA).

Source : Equity Bulls

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