ICICI Direct recommended hold rating on ACC with a target price of Rs 1800 in its research report dated April 25, 2019
ICICI Direct's research report on ACC
ACC reported a weak set of Q1CY19 numbers, especially on the operational front. The topline registered 8.2% growth to Rs 3849 crore (vs. our estimate of Rs 3929.9 crore) led by 5.5% YoY growth in volumes to 7.5 MT (vs. I-direct estimate of 7.6 MT) and 2.6% YoY increase in blended realisations per tonne to Rs 5,133/t (vs. I-direct estimate of Rs 5,190/t). Addition of eight new plants fuelled the RMC segment’s volume growth by 19% to 0.94 lakh cum. EBITDA margins expanded 8 bps to 12% but stayed below our estimate of 13%. This is attributable to higher raw material and freight costs. Though reported PAT was at Rs 346 crore (above I-direct estimate of Rs 302 crore), it includes a one-off item relating to income tax provisions write-back to the tune of Rs 99.5 crore. Thus on an adjusted basis, PAT would be at Rs 276 crore, below our estimates.
General elections have led to slow volume off-take in the near term. However, healthy growth in infra and revival in real estate should help keep overall demand stable in the second half of the year. However, given the capacity constraints faced by the company, we expect volume growth to remain lower than industry. The recent rally in the stock price prompts us to downgrade the stock to HOLD with a revised target price of Rs 1800/share (i.e. at 12.5x CY20E EV/EBITDA).
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