Hold ACC: Ventura

Ventura has recommended hold rating on ACC, in its February 12, 2013 research report.
 
“ACC reported cement revenue growth 6percent on yearly basis to Rs 2640 crore. Growth in cement revenue was supported by realization growth. Cement volume were flat on a yearly basis, which increased by 10percent on QoQ to 5.94 mnt. Absence of pick up in infrastructure and real estate activities across the country has been the prime reason for muted growth in cement volume. However, we expect volume to pick up in the coming quarters given Jan-June period is always considered a busy season for the construction industry and also upcoming assembly and general elections will drive demand growth. During Q4CY12, operating performance was lower primarily due to significant spike in raw material and freight costs.”
 
“Cement EBIDTA witnessed a decline of 20percent YoY to Rs.3110 crore and EBIDTA margins (Cement) came at 12percent (down by 360 bps YoY). Backed by continuous sluggish demand growth in the cement industry during the quarter, cement realisations increased a mere 2percent YoY to Rs 4,474/ton. Going forward, cement prices are expected to improve as the peak construction season kicks in during 1HCY13. While on the cost front, power and fuel costs declined due to decline in international coal and open market coal prices, increase in freight costs and raw material costs negated the benefits of decline in power and fuel cost for ACC for the quarter. This had led to increase of 5percent in costs.”

“ACC’s sales volume stood at ~5.91 mnt for the quarter. The company has ~30percent capacity exposure to the South and demand in the region remains sluggish (with AP being the drag). Dispatch growth for the quarter stood flat at 0.3percent YoY. ACC is in the process of setting up a brownfield capacity of 5 mnT at Jamul that includes split grinding units in Sindri (Jharkhand) and Kharagpur (WB) in line to sustain its market share. The company has also proposed to set up a clinker unit 2.79 mnt at Jamul for which it has already placed order for plant and machinery. ACC expects plant to become operational from CY15 and intends to phase out 1.5 mnT old plant in Jamul post the commissioning of new capacity.”
 
“ACC is in the process of setting up a brownfield capacity of 5 mnT at Jamul that includes split grinding units in Sindri (Jharkhand) and Kharagpur (WB) in line to sustain its market share. The company has also proposed to set up a clinker unit 2.79 mnt at Jamul for which it has already placed order for plant and machinery. ACC expects plant to become operational from CY15 and intends to phase out 1.5 mnT old plant in Jamul post the commissioning of new capacity,” says Ventura research report.

FIIs holding more than 30% in Indian cos

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