Motilal Oswal is bullish on ACC has recommended buy rating on the stock with a target price of Rs 2040 in its research report dated July 18, 2019.
Motilal Oswal's research report on ACC
Volumes down marginally but realizations improve: Volumes declined 0.6% YoY to 7.2mt in 2QCY19. However, premium product volumes were up 9% YoY. Cement realizations increased 8% YoY (+12% QoQ) to INR5,255, led by healthy price hikes in the quarter. Revenue grew 8% YoY to INR41.5b (our estimate: INR37.1b), led by optimization of both market and product mix. Profitability improves 18% YoY: Blended cost/t increased 6% YoY (+4%QoQ) to INR4,678. However, blended EBITDA/t was up 18% YoY (+53% QoQ) to INR1,086 due to healthy realizations. Consequently, EBITDA increased 17% YoY (+47% QoQ) to INR7.8b (our estimate: INR5.8b). Operating margin came in at 18.8% (+1.5pp YoY, +5.3pp QoQ). Adj. PAT increased 22% YoY to INR4.5b (our estimate: INR3.4b).
The stock trades at 7.4x CY20E EV/EBITDA. We value the stock at 10x Jun'21E EV/EBITDA (30% discount to UTCEM) and arrive at a TP of INR2,040 (implied EV/tonne of USD125 on CY20).
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