Prabhudas Lilladher is bullish on ACC has recommended buy rating on the stock with a target price of Rs 1800 in its research report dated July 18, 2019.
Prabhudas Lilladher's research report on ACC
ACC posted PAT ahead of our/consensus estimates by 10%/18% on the back of stronger than expected realisations. Realisations rose by 11% (Rs519/t) QoQ/+8% (Rs374) YoY against our estimate of Rs376 increase. Volume were flat YoY against our estimate of 2% fall. Demand remained tepid across the sectors due to liquidity issues, weaker sentiments and lower govt spending. We do expect some revival in demand post monsoons on the back of revival in govt spending. Nevertheless, All-India demand growth would stuck in the range of 5-6% for FY20E. In the backdrop of weak demand, we expect industry to maintain tight price discipline to support the earnings. Lower coal and diesel prices would aid cost, partly offset by lower operating advantage.
Driven by attractive valuations, we maintain BUY with TP of Rs1,800 assigning EV/EBITDA of 11.5x CY20e. Lack of capacity growth and lower margins have widened discount on valuations to ~30% over its peers. These structural issues would limit the returns in the stock.
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