Oct 22, 2012, 03.04 PM | Source: Moneycontrol.com
Emkay Global Financial Services is bullish on ACC and has recommended accumulate rating on the stock with a target of Rs 1510 in its October 19, 2012 research report.
, Emkay Global Financial Services |
“ACC’s Q3CY12 EBITDA at Rs4.35bn, +97.3% yoy and -33% qoq, came in below estimates of Rs4.85bn as cement realizations at Rs4527/t (vs estimates of Rs4648/t) declined 1.4% qoq vs our estimate of 1% improvement. However we notice that the decline in cement realizations ex freight is just 0.5% qoq as freight costs/t (Rs903/t vs estimates of Rs950/t) declined by 5% sequentially, led by lower inter unit clinker movement, implying dispatches to nearer markets at the expense of lower realizations. With lower than estimated operating performance, APAT for the quarter at Rs2.48 bn, though up 102% yoy, came in lower than estimates of Rs2.88 bn.”
“ACC’ cement realisation though lower than our estimates saw hefty improvement of 19.7% yoy as delayed monsoon across country meant lower season price drops (3QCY12 realisation dipped 1.4% qoq vs a sharp 6.7% qoq decline in 3QCY11). Hence despite volume decline of 5% (driven by ACC’s market share loss), revenues for the quarter grey a healthy 13.7% yoy to Rs24.45bn (vs estimates of Rs25.3bn). On the cost front, total costs/t at Rs3721, (+9.6% yoy, +5.8% qoq) increased Rs206/t sequentially; driven by lower volumes and 5% qoq jump in P&F cost/t (Rs1049/t).P&F cost increased as lower volume (10.7% qoq decline in volumes) impacted energy efficiencies. However we were positively surprised by 5% qoq dip in freight cost/t, despite a 5-7% road freight hike in Sept-12. Freight cost decline was primarily on account of lower inter unit clinker transfer to cement grinding units. However freight cost is expected to increase in subsequent quarter led by full impact of recent road freight hikes and levy of service tax on rail freight.”
“After a dismal CY12E volume performance (CY12 volume growth of 4.3%), we expect ACC’s volume growth to improve driven by demand pick up in ACC’s key North, Central & Eastern market. This coupled with minimal capacity addition in Northern & Central region is expected to help improving pricing power in these regions. This we believe would drive further an impressive 19% EBIDTA CAGR for ACC over CY12-14E helping further improvement in return ratios from 24% in CY12E to 28.7% in CY14E. Considering these we believe ACC’s valuation at 8.6X EV/E, USD 140 EV/T, provides reasonable comfort compared to expensive valuation for peers (Ambuja EV/E 9.5X & EV/T USD 183, Ultratech- EV/E 10.5 X, EV/T USD170). Maintain ACCUMULATE,” says Emkay Global Financial Services research report.
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