ACC numbers on the top line are lower than estimates, says V Srinivasan of Angel Broking. Margins too have been a big disappointment, adds Sanjeev Singh of Centrum Broking. On a year on year and sequential basis, the company has posted margin improvement of 40-50 basis points only, Singh says.
PAT has come in much higher, but that’s only because of tax adjustment, Singh adds. Excluding tax adjustment, the numbers are probably much lower than estimates. Going ahead, Singh expects some improvement in EBITDA margin, but that will be driven by volume increase in Q1 of CY14. Singh has a hold rating on the stock with a target price of Rs 1070.
Srinivasan had estimated around 2 percent growth on volumes of around six million tonne. But it has come in slightly lower. He has a buy rating on the stock with a target price of Rs 1225.
Below is the interview of Sanjeev Singh of Centrum Broking and V Srinivasan of Angel Broking with Menaka Doshi, Senthil Chengalvarayan and Anuj Singhal on CNBC-TV18.
Menaka: The ACC numbers on the top line are lower than expected on the EBITDA and EBITDA margin front are lower than expected, profitability has come in far higher than anticipated. Do you have any more idea on the breakdown of those numbers and what could have led to this?
Srinivasan: It is slightly lower than estimates on the top line front. I feel the EBITDA margin certainly is a surprise. I have an EBITDA figure of around 13.6 percent which is ahead of what the street was expecting.
Senthil: Have you had a look at the ACC numbers? Their EBITDA has come in slightly less than what most people expected. Their sales have come in slightly less than what most people expected but their net profit has come in much higher partly because of a tax write back. Can you break it down further for us?
Singh: I am seeing the numbers which you are showing. In terms of revenues definitely it is slightly above our estimates but in terms of margins it is a big disappointment even in this quarter because if you see on a year on year and a sequential basis the company has posted a margin improvement of around 40-50 bps only. So, that is a disappointment. We were expecting the margins to be in the range of around 10.6 percent.
The PAT looks better because of tax adjustment but if you exclude the tax adjustment then probably I think the numbers are much lower than what we were estimating.
Nigel: The second quarter running we are seeing that the EBITDA margin is in single digits. That is a big disappointment do you think the worst is over or is the single digit going to be something we are going to be looking at?
Singh: There should be some improvement going forward but as I understand that will be driven by the volume increase in Q1 of CY14 because in terms of realization nothing much is happening. So, realizations some where it is up some where it is declining. So, probably we will see some sort of better numbers ahead but not a very superior number will be seen from the company.
Nigel: What is your target on this particular stock given that the EV per tonne is at around USD 100 for such a big company?
Singh: If you ask me in term of triggers, the triggers are missing for the sector as a whole for the next one or two quarters. We have a hold rating on the stock and we would maintain that rating probably with a target price of Rs 1070.
Nigel: What do you think of the numbers with regard to the volumes, were you working with 5.85 percent that is the number we are getting if we deduct full year’s minus the nine months?
Srinivasan: Volume my estimate is slightly lower, I had estimated around 2 percent growth on volumes of around six million tonne, so it has come slightly low. But if you see for cement companies the realisation is causing more pain than the volumes.
Nigel: At an EV per tonne of around USD 100, do you think the stock is undervalued at this point of time? Would you all change your estimates?
Srinivasan: We have a buy rating on the stock with a target price of Rs 1225.
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