ACC Ltd. share price target

EBITDA margin expanded 310bps YoY to 16.7% on cost optimization supported by better supply chain management and product mix. However, Adj. PAT was down 6.6% YoY on lower other operating...

Given the steep increase of Rs7590/bag in April-May, softness w as South expected in prices. Prices in (Rs/bag) AP/Telangana fell Rs20/bag MoM as it w itnessed steepest increase. Prices in...

Our channel check suggests, average cement prices at an all India level is up 0.8% MoM in June-2020. Cement prices are holding up the sharp price hike seen in May20. Recall, in May-20 cement price increased by ~6% MoM. Price hike is implemented for the partial recovery of fixed costs as demand took a hit due to lockdown. Cement industry production decreased by 86% YoY for April 2020 (latest data available). Led by pent up demand, cement companies has seen sharp increase in the utilization to 65% in May-20 (implying cement volume of -20% to 25% YoY in May-20). We expect the gradual improvement in demand led by rural India. Segment wise, cement demand is driven by Infra (25%), Commercial (14%) and Housing (61%). In Housing, its sub segment Rural housing (35%) is expected to...

ACC Ltd reported de-growth of 11% YoY in top-line to`35,017mn on account of fall in sales volumes to 6.6mn MT (down by 12% YoY). Realisations remained flat YoY as cement prices were steady across its key operating markets. EBITDA in Q1CY20 stood at `5,865mn up ~10%YoY with corresponding EBITDA margins at 16.7% (up 318 bps YoY and 343 bps QoQ). Increase in EBITDA was reported due to lower raw material costs and power and fuel costs. During the quarter, the company also commissioned two new plants of RMC (Ready Mix concrete) to strengthen its footprint in the building materials industry....

ACC Q1CY20 EBITDA was marginally (-5%) lower than our estimate but higher (+11%) than consensus estimate. Key highlight of the quarter was softness in raw material cost and this is partially driven by benefit from commencement of master supply arrangement with Ambuja Cement. ACC has resume operations at its plants in phased manner starting 20th April 2020. But we understand, catalyst for stock is announcement around Infra stimulus by the central government. Company with net cash of Rs44b provides it with cushion from any extended period of weak topline. Stock (valuation) is trading at -1 STD of its past averages and we retain out BUY rating with unchanged TP...

FY21E is expected to be a soft year and we expect cement demand to decline by 5% Costs favor cement industry: Variable (Fuel and freight) cost of cement is YoY. Cement stock prices are partially reflecting this as they are down ~20% in the expected to remain soft as crude has witnessed sharp correction. In cement last 3 months. Valuation wise (EV/EBITDA), stocks are trading at average to -1 manufacturing, these two costs contribute 40-45% of the total opex. Other standard deviation of last 10 years valuation band. Though demand outlook is variable costs are raw material. Fixed cost (Employee, Admin, overheads) of...

Govt.'s push for infra development should boost demand for cement in the next few years. We reiterate our BUY rating on the stock with a revised target price of Rs. 1,650 based on 9.5x CY21E EV/EBITDA. Margin improvement driven by cost efficiencies ACC's Q4CY19 revenue grew 4.2% YoY to Rs. 4,060cr, on the back of a steady growth in Cement business of 3.4% YoY to Rs. 3,705cr (~91.2% of total sales). Ready-mix concrete (RMC) business also registered a decent revenue growth of 8.2% YoY to Rs. 389cr. Cement business revenue witnessed muted volumes growth of 3.9% YoY to...

Volume growth to remain subdued amid capacity bottlenecks ACC ended CY19 with marginal volume growth of 2% YoY on the back of weak industry growth since Q2CY19. Industry growth is expected to revive from 2020, subject to effective implementation of the project pipeline laid down in the NIP, which was recently announced by the government. While ACC should benefit from the same on the back of the company's diverse presence, its growth would remain limited owing to capacity constraints. While the company has undertaken capacity expansion plans, the new...

ACC 4QCY19 EBITDA was marginally (+5%) higher than our estimate but 6% lower than consensus estimate. Surprise in the result was volume increase of 4% YoY, where as we were expecting volume to be flat. EBITDA /t stood at Rs697 vs Rs653 YoY and our est of 665. Pricing decline at 4% QoQ was in line with our estimate. RMC division reported 8% vol. increase with sharp improvement in EBIT margins of 7% YoY. We maintain our estimate with volume increase of 3% pa and EBITDA/t of Rs850/865 for CY20/21. Maintain accumulate rating with target price of Rs1,596 which is based on 10x (unchanged) CY20E EV/EBITDA. Catalyst for stock performance is volume increase and price increase higher than...

We trim our EBITDA est for CY20/21E by 9/1% each factoring in weak pricing impact. Despite weak pricing, we expect ACC's margin to sustain at ~Rs 800/MT levels driven by energy cost tailwinds. The upcoming expansions of 6mn MT in central and east markets will drive volume growth CY22 onwards. Our EBITDA est for ~5% lower CY20/21E are We maintain BUY with a TP of Rs 1780 (10x CY21E EBITDA), implying EV of USD 140/MT. We continue to apply 20% discount to its 5-yr mean, for ACC's significant delays in expansions and subsequent continued market share loss. We maintain BUY on ACC with a revised TP of Rs 1,780 (11x its CY21E consolidated EBITDA, implying EV of USD 140/MT). While ACC closed CY19 with subdued 4QCY19 performance in the cement segment, working capital release boosted its CY19 OCF to a decade high!