Accumulate ACC; target of Rs 1550: Prabhudas Lilladher

Prabhudas Lilladher's research report on ACC

ACC reported disappointing set of numbers for Q3CY16. Higher than expected increase in costs played the spoilsport despite highest ever usage of cheaper petcoke (up 440bps YoY with share at 63%), higher availability of captive limestone and lower crude derivative prices. Contrary to our expectations, company failed to deliver on majority of key business aspects like adding limestone reserves, protecting market share, cost efficiency and timely capacity expansion. We have cut our earnings estimates by 8%/18% for CY16/CY17 to factor in lower realisations and muted volume outlook. In the backdrop of worsened outlook on company's operational performance, we downgrade the stock to Accumulate with TP of Rs 1550 (earlier TP of Rs 1835), EV/EBITDA of 15x CY17E.