Buy ACC; target of Rs 1868: Dolat Capital

Dolat Capital's research report on ACC

ACC posted a strong set of numbers with 7.8%/ 25.3%/ 38.6% YoY growth in revenue/ EBITDA/ APAT to `41.5 bn/ `7.8 bn/ `4.5 bn in Q2CY19 driven by strong 8.4% YoY/ 10.3% QoQ realization growth. We expect 6.8/ 25.1%/ 21% revenue/ EBITDA/ APAT CAGR over CY18-20E led by 1.1%/ 3.7% volume growth and 5.8%/ 2% cement realization growth in CY19E/ CY20E. Considering ACC’s healthy cash flow & RoE, net cash position, and 5.9mtpa (17.7% increase), current valuation of 10x/ 9.1x CY19E/20E EV/EBITDA is attractive.

Outlook

We recommend BUY with a TP of `1868 (11x CY20E EV/EBITDA). Given ACC’s high capacity utilization at 86%/ 86%/ 89% for Q2CY19/ CY19E CY20E (leaves little headroom for volume growth), sustainability of current cement realization is more important for profitability.