Sell ACC; target of Rs 1459: HDFC Securities

HDFC Securities' research report on ACC
ACC’s numbers were inline (EBITDA/t at Rs 704/t vs estimated Rs 699/t, 7.7% YoY, 48.0% QoQ). The company witnessed double-digit volume growth (6.74 mT, 10.1% YoY) for the first time since 3QCY11, led by capacity addition in the East (4 mTPA, commissioned by 3QCY16). Strong pricing (Rs 4,509/t, 5.7% YoY, 5.7% QoQ) also aided growth, as overall costs remained flattish QoQ (Rs 3,805/t, 5.3% YoY). Other operating income surprised (Rs 1.4bn, ~2x YoY), driving the earnings beat (Rs 3.2bn, 35.3% YoY, 52.1% QoQ, est Rs 2.85bn).

Outlook

However, demand is likely to dip now, given the strong onset of monsoon. Continuing issues with sand availability in some key states (UP, Punjab, Tamil Nadu) will further weigh on demand.

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