Cement major ACC disappointed analysts in a big way by reporting weaker-than- expected numbers for its third quarter ended September. Consolidated profit in third quarter fell 28.8 percent year-on-year to Rs 82 crore on lower operational income and revenue versus street estimates of roughly Rs 170 crore.
Cement sales volume for the quarter stood at 5.07 million tonnes, down 9.6 percent compared with 5.61 million tonnes in corresponding period of last fiscal.
Sharing his analysis on the numbers, Prakash Diwan of prakashdiwan.in said the company has not been able to get the pricing power which UltraTech commands, and more so because ACC is active more in the North and East than South. Companies not operating in the South are likely to suffer, he said
Diwan is not so concerned about the volume de-growth but is worried about their inability to price themselves like the larger players.
Siddharth Purohit, Angel Broking too said numbers are clearly disappointing be it in terms of volumes or absolute EBITDA and EBITDA per tonne.
Usually, realisations for the sector improve during the third and fourth quarter and if companies are unable to improve on pricing by even 2-3 percent year on year, then it is a serious problem.
The EBITDA per tonne is also very low compared to our estimates, said Purohit.
Echoing Diwan’s view, Purohit says usually the house factors in better numbers for the second half but now, one will have to review the volume guidance etc for the blended numbers.
According to Purohit, ACC currently seems to be fairly valued and one could see some downside for the stock in the near-term, adding, they had a neutral rating on the stock.
Mangesh Bhadang, Nirmal Bang Securities said besides disappointing on all fronts, the two key negatives were volumes and costing. The rise in other expenses and freight cost is surprising.
The other income on sequential basis on per tonne basis was up 23 percent.
There is, therefore, no reason to buy the stock said Bhadang. It is likely to see a decent decline.
Diwan said if one is keen to buy into a cement play, UltraTech is definitely superior for the simple reason that it has already delivered. Moreover, as it gets closer to its integration of Jaypee assets, it will widen the gap between UltraTech and ACC.
Therefore, Diwan does not recommend fresh buying into the stock but said it is an opportunity for people who are sitting on profits to get out.For more, watch video
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