Buy ACC; target of Rs 2075: KR Choksey

KR Choksey's research report on ACC

Total Sales stood at INR 39586 Mn as against our estimate of INR 37970 which was up by 20.5% Y-O-Y and 9.0% Q-O-Q. Volume growth stood at 10.1% Y-O-Y reaching 6.74 MT (est. 6.6 MT) as against 6.12 MT in Q2CY16.  •EBIDTA stood at INR 6355 Mn which was up by 37.8% Y-O-Y and up 52.7% Q-O-Q and EBIDTA margin stood at 16.1% as against 14% same quarter last year. Lower COGS and other expenses resulted in better than expected EBITDA margins (margins of 16.1% as against our estimate of 12%). Adj.PAT stood at INR 3218 Mn which was up by 32.7% Y-O-Y and up 52.2% Q-O-Q while PAT Margin stood at 8.1%. Volume outperformance and improvement in the operating efficiencies has led to a significant hike in PAT.

Outlook
We value ACC Ltd at an EV/EBITDA of 13x CY18E and arrive at a target price of INR 2075 which is an upside of 18.5% from CMP of INR 1751 and valuations are subject to re-rating depending upon volume growth sustainability and improvement in operating efficiencies. We upgrade our rating from HOLD to BUY. For all recommendations report, click here

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