Buy ACC; target of Rs 1820: HDFC Securities

HDFC Securities' research report on ACC

During 3QCY20, ACC reported consolidated net sales/EBITDA/APAT growth of 0/21/20% YoY to Rs 35.37/6.71/3.64bn respectively (ahead of our estimates of Rs 34.52/5.71/2.98bn). Buoyancy in retail demand, lower fuel costs and continued cost controls boosted earnings rebound. The earning beat (vs our estimate) is on account of better than expected operating cost reduction. While we expect retail sales to accelerate further, non-trade should also recover going ahead, boosting volume outlook.

Outlook

We are also enthused by ACC’s continued surprise on fixed cost controls, which is driving margin expansion. Subsequently, we upgrade estimates and maintain BUY with a higher target price of Rs 1,820/share (10x Sep’22E consolidated EBITDA).

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