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ACC share price touches 52-week high; what should investors do with ACC post Q3

The company, which follows January-December financial year, posted Q3 revenue at Rs 3,537.3 crore against Rs 3,528.31 crore YoY.
Oct 20, 2020 / 09:44 AM IST

ACC share price touched a 52-week high of Rs 1,597.45, adding 2 percent in the early trade on October 20, a day after the cement manufacturer reported a jump in profits in the third quarter.

The company, which follows January-December financial year, posted a consolidated net profit of Rs 363.85 crore, up 20.26 percent year-on-year (YoY) for the September quarter. It reported a profit of Rs 302.56 crore in the corresponding quarter of the previous financial year.

Also Read - ACC Q3 is a hit; 20% YoY jump in profit, beats market estimates on most fronts

The company posted Q3 revenue at Rs 3,537.3 crore against Rs 3,528.31 crore YoY. “Amidst COVID disruption, volumes of ACC during the quarter witnessed flattish trajectory yoy on the back of strong rural demand. Further, ACC delivered a big beat on EBITDA level (20 percent above estimates) led by a) higher than expected realization/te, b) lower freight costs and c) savings on fixed costs,” said Kunal Shah, Analyst – Institutional Equities at Yes Securities.

Here is what brokerages have to say on the stock:

CLSA | Rating: Buy | Target: Raised to Rs 1,920 from Rs 1,730

The Q3 EBITDA of 20 percent/30 percent was above our brokerage's estimates. The third quarter of better cost control implies that the steps taken may be sustainable. The utilisation is unlikely to be a bottleneck for growth, CNBC-TV18 reported the brokerage as saying.

Morgan Stanley | Rating: Equal-weight rating | Target: Rs 1,565

The company’s strong EBITDA reflects improving volume trends & resilient realisations YoY, reported CNBC-TV18.

Citi | Rating: Buy | Target: Raised to Rs 2,075 from Rs 1,950

The volume trajectory is looking upwards and a price hike is expected after the festival season in November. The company is Citi's top pick in the cement space with UltraTech Cement, CNBC-TV18 reported.

Jefferies | Rating: Buy | Target: Raised to Rs 2,200 from Rs 1,900

The company reported a sharp rise in Q3CY20 'purchases'. The cost- efficiency remains a theme and makes the company an exciting story, CNBC-TV18 reported the research firm as saying.

Prabhudas Lilladher | Rating: Buy | Target: Rs 1805

This is the third consecutive quarter of strong performance by ACC, backed by sustained cost reduction (down 4 percent YoY in 9MCY20) and better realisations. However, inconsistency has been an issue with ACC. Though seeing the meaningful reduction in energy consumption, rationalisation of fixed costs and increased supplies under Master Supply Agreement (MSA) with Ambuja, the broking house expects EBITDA margins to sustain at Rs 850/t (without other operating income), the highest since CY10.

It has upgraded EBITDA estimates for CY21/CY22 by 10 percent/8 percent to factor in better realisations and lower costs. There is ample scope for further reduction in costs (increase in the share of waste-heat recovery and reduction in fixed costs) and ongoing capacity expansion of 5mtpa in the central region continues to drive the firm's positive outlook on the stock.

Dolat Capital | Rating: Buy | Target: Rs 1966

Dolat Capital increases its revenue/ EBITDA/ PAT estimates by 3.8 percent/ 8.6 percent/ 7.4 percent for CY20E. It broadly maintains CY21E estimates and introduces CY22E.

Considering ACC’s healthy cash flow and RoE, net cash position, and 5.9mtpa (17.7 percent increase) capacity expansion, current valuation of 10.3x/ 8.7x/ 7.3x CY20E/ CY21E/ CY22E EV/EBITDA provides comfort which is 23 percent/ 35 percent/ 38 percent discount to 1 year Fwd EV/EBITDA of 3/ 5/ 10 years.

ICICIdierct | Rating: Buy | Target: Rs 1,850

Structural issues with respect to CoP need to be addressed for the sustenance of healthy margins in the long run. On the positive side, strong B/S and improved cash flow remain key positives. After a strong performance with improved outlook, ICICIdierct has upgraded the rating to buy with a revised target price of Rs 1,850 (valuing at 10x CY21E EV/EBITDA implying an EV/t of ~$110).

Motilal Oswal | Rating: Buy | Target: Rs 1,805

ACC trades at a 35–60 percent valuation discount to peers Shree, UltraTech, and Ramco. Motilal Oswal believes such a large discount is excessive as: (a) ACC has arrested its market share losses since CY17, (b) its net cash balance sheet (~18 percent of market cap) renders it well-placed to withstand any extended disruption from COVID-19 and (c) with planned capacity expansions in CY22, the proportion of inefficient assets would decline, improving profitability.

At 0917 hours, ACC was quoting at Rs 1,593.80, up Rs 31.15, or 1.99 percent on the BSE.
Moneycontrol News
first published: Oct 20, 2020 09:44 am
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