Hold ACC; target of Rs 1254: A C Choksi

A C Choksi has recommended hold rating on ACC with a target of Rs 1254, in its April 21, 2012 research report.

“Our Initiation target for ACC was achieved on 11th April, 2012. We maintain ourHOLDRating on the firmwith our initiation target of 1254.”

“ACC Ltd, the second largest cement producer in the country, has reported a yo- y fall of 57% in its bottomline for the quarter ended 31-3-12.During the first three months of CY12, it registered a PAT of 1,516 mn as compared to 3,502 mn same quarter last year and 4,692 mn posted in 4QCY11. Net profit after excluding extraordinary additional depreciation charge rose by ~39% y-o-y. Method of charging depreciation on fixed assets of captive power plants was changed retrospectively from SLM to WDV method. This has resulted in an additional one time depreciation of 3,413 mn which dented its PAT for the quarter. Diluted EPS for 1QCY12 came in at 8.05 as compared to 18.61 for 1QCY11 and 24.61 for 4QCY11. The EPS for CY11 was at 69.1. ROE fell to 8% from 20% y-o-y.”

“The company's EBITDA for the quarter increased by ~10.4%(y-o-y) to 6,477 mn. The company registered a q-o-q growth of ~47% at the EBITDAlevel for 1QCY12. The net sales for 1QCY12 increased to 30,152mn; showing a growth of 18.6% over 1QCY11 .On a q-o-q sales increased by 13.9%. The sales growth was on account of 9% volumes growth from 6.2 million tonnes to 6.7 million tonnes. NetRealization came at 4,256/T vs 3,868/T (y-o-y) and 4,204/T (q-o-q).”

“We have a long term coverage on ACC Limited with HOLD Rating and target price of 1254, valuing it at 7.0x CY2013E EV/EBITDA and an implied EV/tonne of ~$127.6/tonne. Even though the company is well placed in the industry due its pan India presence, brand image, promoter group in Holcim, increasing market share, focus towards reducing cost and strong balance sheet, we believe the upside potential would be limited on the back of valuations and large cement players may see pressure due to the indication from the Competition Commission of India (CCI) on penalizing cement companies if report on cartelization is found true,” says A C Choksi research report.    

Non-Institutions holding more than 90% in Indian cos

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