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Last Updated : Feb 10, 2020 01:42 PM IST | Source:

ACC share price falls 3% after Q4; 6 top brokerages have mixed views on the stock

In the December quarter of the year 2018, the company's profit was Rs 730.47 crore, so on a YoY basis, the numbers are down 63.15 percent.

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Shares of ACC fell over 3 percent in intraday trade on BSE on February 10 on some profit-booking after the company, on February 7, reported a 10.26 percent quarter-on-quarter (QoQ) fall in its standalone net profit at Rs 269.2 crore for the December quarter of the year 2019 against Rs 299.97 crore in the September quarter.

A CNBC-TV18 poll had projected Q4 profit at Rs 328 crore.

In the December quarter of the year 2018, the company's profit was Rs 730.47 crore, so on a YoY basis, the numbers are down 63.15 percent.


Standalone revenue from operations came at Rs 4,060.3 crore in Q4CY19, up 15 percent against Rs 3,527.6 crore reported in Q3CY19.

The quarterly earnings of the cement-maker fetched mixed reviews from brokerages.

Nomura is neutral

Nomura has a neutral call on ACC with a target price of Rs 1,750.

Nomura attributed the Q4 miss of ACC to the higher raw material costs. Higher inventory cost is a key drag on margin while the company is not fully geared to benefit from demand pick-up.

Kotak has a 'reduce' call

Kotak Institutional Equities maintained a reduce rating on the stock with a target price raised to Rs 1,550 from Rs 1,500 and said that the valuations are inexpensive but the company lacks upside triggers.

The brokerages highlighted that ACC's Q4CY19 EBITDA missed estimates due to lower than expected realisations while the calendar year 2019 volume growth at 2 percent was lower than the market growth.

"Market share reduction should continue until the year 2021, given high utilisation. A 6 mtpa expansion project is witnessing slow progress and may be delayed to the year 2022," Kotak said.

JM Financial advises 'hold'

ACC’s Q4CY19 EBITDA missed expectations primarily on lower realisations, said the brokerage.

"With utilisations hovering at 85 percent, we believe the current expansion pipeline of 5.9MTPA (18 percent of existing capacity) will be inadequate to accommodate a reasonable volume growth in the medium-term as well as necessitate clinker/cement purchases in high demand quarters, thus yielding lower EBITDA/t," said JM Financial.

The brokerage said it continues to value the stock at 10 times EVE and maintain 'hold' with a revised target price of Rs 1,670.

Motilal Oswal has a buy call

Motilal Oswal Financial Services has a buy recommendation on the stock with a target price of Rs 1,790 and said that ACC remained focused on growing the premium product portfolio, wherein volumes were up 6 percent YoY in Q4; RMX volume grew 8 percent YoY.

Motilal underscored that the company has been working on supply chain efficiencies and source mix optimization to reduce costs.

"Alternative fuel consumption improved while the company also improved its electrical energy efficiency. Freight cost/t improved in Q4CY19 due to road freight reduction and an improvement in logistics operating efficiencies. Packing material cost reduced too," Motilal Oswal said.

As per the brokerage, ACC has faced significant de-rating over the past five years and now trades at 35-55 percent discount to peers such as Shree Cement, UltraTech and Ramco.

"With the recent capacity announcements, ACC’s proportion of inefficient assets is likely to decline, driving healthy profitability. From that perspective, such a large valuation gap against peers is unwarranted, in our view," Motilal said.

"We value ACC at 9 times CY21E EV/EBITDA (nearly 35 percent discount to the past five-year average of 13 times) to arrive at a target price of Rs 1,790, which implies a target EV/t of $100 and a target P/E of 20 times on CY21," the brokerage added.

Reliance Securities has a buy call

Reliance Securities has a buy call on the stock with a target price of Rs 1,760.

The brokerage said it continues to maintain its positive stance on ACC owing to its strong penetration in rural markets (nearly 75-80 percent trade segment volume) and consistent focus on premium products.

"Timely commissioning of the upcoming capacities will eventually aid ACC to sustain growth momentum. Looking ahead, we expect its operating performance to improve led by visible realisation up-tick and benign cost environment. As the current valuations at 10.3 times and 9.4 times EBITDA of CY20E and CY21E appear to be attractive, we maintain our buy recommendation on the stock with a revised target price of Rs 1,760 (11.5 times of CY21 EBITDA)," said the brokerage.

IDBI Capital says 'accumulate'

IDBI Capital has an 'accumulate' call on the stock with a target price of Rs 1,596 and said that ACC's Q4CY19 EBITDA was marginally (up 5 percent) higher than its estimate but 6 percent lower than the consensus estimate.

"We maintain our estimate with a volume increase of 3 percent per annum and EBITDA/t of Rs 850/865 for CY20/21. We maintain accumulate rating with a target price of Rs 1,596 which is based on 10 times (unchanged) CY20E EV/EBITDA," said the brokerage.

The catalyst for the stock performance is volume increase and price increase higher than our estimate of 3 percent and 2 percent per annum, respectively, said the brokerage.

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First Published on Feb 10, 2020 01:30 pm
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