ACC Ltd. share price target

With strong performance and positive outlook, we upgrade our rating on the stock to BUY with revised target price of Rs. 1,747 based on rollforward valuation multiple of ~11.0x CY20E EV/EBITDA. Improved product mix with strong realisation ACC registered revenue growth of 7.8% YoY to Rs. 4,150cr in Q2CY19. Cement business contributed 93.0% of total sales (+7.3% YoY), followed by Ready-mix concrete (+14.1% YoY). Cement sales volume remained stable YoY at 7.2mn tonnes, whereas RMC volume grew 10.4% YoY to 0.85mn cubic metres helped by contribution from eight new RMC plants. Q2CY19 EBITDA totalled Rs. 783cr (vs Rs. 625cr in Q2CY18),...

We estimate ACC to deliver 13/17% EBITDA/PAT CAGR during CY18-20E. Given ACC's healthy cash flow and RoE, and its firming up major expansion plans (20% capacity increase by end CY21E/early CY21E), current valuation (of 9.3x/8.8x its CY20/21E EBITDA, EV/T of USD 120) is inexpensive. We reiterate BUY with a TP of Rs1,930 (ascribing 11x to its Jun-21E EBITDA and 0.5x to its CY20E CWIP). Key risks: Sharp roll back in cement prices, rebound in energy costs (crude led). We reiterate BUY on ACC with TP of Rs 1,930 (11x its Jun-21E consolidated EBITDA and 0.5x its CY20E CWIP).

ACC reported extremely good set of 2QCY19 results, driven by higher than expected realizations. Net sales/ PAT was 3.8%/9.7% above our estimates. EBITDA at Rs7.8bn was 7.8% above ours and 27% above consensus estimate. Key reason for the strong beat has been pricing which at Rs5,306/mt is up 10.9% QoQ against our expectation of 7% growth. Apart from the overall pricing growth in the markets, higher proportion of premium cement sales (up 9% YoY) would have also aided overall growth in pricing. Cement volumes were flat YoY at 7.2mn mt, exactly in-line with our estimates. RMC division reported 11% volume growth but EBIT margins were down to 4.4% compared to 10.2% in March 2019 on account...

Budgetary catalysts to aid demand; ACC to grow at slower pace The recent Union budget reiterated the government's focus on infrastructure growth. Compared to the current annual spend rate of | 7-8 trillion per annum towards infra, the government has laid out an ambitious plan of annual spends of | 20 trillion. Additionally, under the PMAY scheme, the government plans to construct 1.95 crore houses in the rural areas and ~81 lakh in urban areas. This would further boost cement demand. However, this could be impaired by the slowdown seen in various sectors. Though the...

ACC reported stellar set of numbers in Q2CY19, beating our estimates on all fronts. Revenue grew 7.8% YoY to Rs 4,150 cr above our estimate of Rs 3,941 cr. EBITDA stood at Rs 783 cr against our estimate of Rs 615 cr. EBITDA margin expanded 530bps YoY to 18.9%, ahead of our estimate of 15.6%. PAT for the quarter jumped 38.6% YoY to Rs 456 cr way ahead of our estimate of Rs 335 cr. EBITDA/ton jumped to 7-year high at Rs 1089/ton, witnessing a robust growth of +26% YoY/+54% QoQ. We maintain our...

18 July 2019 Volumes declined 0.6% YoY to 7.2mt in 2QCY19. However, premium product volumes were up 9% YoY. Cement realizations increased 8% YoY (+12% QoQ) to INR5,255, led by healthy price hikes in the quarter. Revenue grew 8% YoY to INR41.5b (our Blended cost/t increased 6% YoY (+4%QoQ) to INR4,678. However, blended EBITDA/t was up 18% YoY (+53% QoQ) to INR1,086 due to healthy realizations. Consequently, EBITDA Operating margin came in at 18.8% (+1.5pp YoY, +5.3pp QoQ). Adj. PAT volumes were up 11% YoY. (2) Power & fuel cost/t increased 9% YoY due to higher premium on e-auction coal and increased pet coke/imported coal prices.

ACC ended CY18 at a capacity utilisation of ~86%, up from 79% in CY17 on the back of strong industry growth during the year. However, for the long term, growth constraints have been addressed with the announcement of greenfield, brownfield projects. These projects entailing a capex of | 3000 crore would enhance the grinding capacity by 5.8 MT. However, additional capacities are expected to come into operation only by CY21E. Thus, for CY19E, CY20E, the company is expected to report lower than industry...

We estimate ACC to deliver 13/16% EBITDA/PAT CAGR during CY18-20E. Given ACC's healthy cash flow and RoE, and its firming up major expansion plans (20% capacity increase by end CY21E/early CY21E), current valuation (of 9.9x CY20E EBITDA, EV/T of USD 130) is inexpensive. We recommend BUY with a TP of Rs1900 (11x its Mar-21E EBITDA and 0.5x its CY20E CWIP). Key risks: Roll back in cement prices, surge in energy costs (crude led). We recommend BUY on ACC with TP of Rs 1,900 (11x its Mar-21E consolidated EBITDA and 0.5x its CY20E CWIP).

ACC reported weak 1QCY19 numbers, again, driven by higher raw material costs and weaker than expected realizations. While net sales at Rs39.2bn were in line with our estimates, EBITDA at Rs5.3 bn was 2.5% below ours and 8% below consensus estimates. Key driver for this variance has been higher raw material costs (including purchase of stock in trade) at Rs949/mt, up 19% YoY. Higher slag and fly ash prices coupled with higher purchases possibly from Ambuja as a part of synergy drive, have resulted in this increase in our view. Cement volumes grew by 5.5% YoY at 7.5mn mt whereas realizations were flat QoQ. RMC division reported relatively better numbers with 19% volume growth....

volume growth in Eastern region. Benefits from cost optimization were lower than our expectation which coupled with increase in fuel and slag prices led to 2.5 YoY (PLe: 1.7%) increases in cost on per tonne basis. While the profitability is under pressure for the sector due to intense competition, unabated capacity addition and weakness in high margin Trade segment, cement prices continue to remain firm in ACC's key markets of Central UP, MP, Jharkhand, Odisha, etc thereby fetching higher realisations....