Emkay's report on ACC
ACC Q1CY15 EBITDA at Rs4.1bn against our estimate of Rs3.1bn was a positive surprise primarily driven by cost efficiencies as operating costs declined Rs239/tn QoQ. Sharp cost reduction on sequential basis came as a surprise as the clinker units in the East region resumed operations only from Feb 11, ’15
Sales volume declined 10.2% yoy led by lower production in the East region (Chaibasa and Bargarh plants) due to limestone mining ban for some part of the quarter and lower demand during the quarter
Upgrade CY15e/CY16e EBITDA by 3.3%/2% primarily due to lower expected operating costs post resumption of mining operations in the East region
Valuation at 15.7x/11.5x CY15e/CY16e EV/EBITDA appears rich in a scenario when volume growth is under pressure and leave little room for further upside. Maintain Hold with a revised price target of Rs1,661 (earlier: Rs1,536)
"The company has lagged behind its closest peer, UltraTech, in volume growth due to lack of new capacities. Post volume decline of 0.7% in CY13, the company reported muted volume growth of mere 2.1% in CY14 and we expect flat volume growth for CY15e. We expect the company to benefit from cost saving measures only in CY16e post commissioning of new capacities in the East region. Though, we expect earnings to improve going forward led by higher prices and benign operating costs, we believe that these positives are largely factored in the stock price. We maintain Hold rating on the stock with revised PT of Rs 1,661 (earlier: Rs 1,536)", says Emkay Global Financial Services research report.
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