Visit http://indiaer.blogspot.com/ for complete details ACC 3QCY10: Below estimates, impacted by lower than estimated volumes and higher cost push; Cutting EPS
ACC’s (ACC IN, Mkt Cap US$4.2b, CMP Rs983, Buy) reported significantly below estimated standalone performance with EBITDA margins of 10.4% (v/s est of 19.5%) and adj. PAT of Rs931m (v/s est Rs1.93b), impacted by higher than estimated decline in realizations and cost push.
Muted volumes, drop in realizations impact revenues…
- Volumes de-grew by 3.6% to 4.83MT (v/s est 4.76mt). Realization declined by 7.8% QoQ (~10% YoY) to Rs3,390/ton (v/s est Rs3,534/ton).
- As a result net sales declined by 16.9% to Rs16.37b (v/s est Rs16.8b)
- Volumes were impacted by almost quarter long shutdown at its Wadi plant for linking-up of new brownfield expansion of 3mt.
- ACC Concrete, a 100% subsidiary, reported 15% YoY growth in revenues to Rs1.36b.
Valuation and view
- After three years of muted volume growth, ACC would witness robust volume growth of ~10% CAGR over next two years driven by new capacities.
- Allotment of coal blocks in MP (in JV with the state) and West Bengal (in consortium) offers option value in long term.
- Improvement in ACC’s asset earning power, coupled with completion of divestment of non-core businesses, makes it attractive pure-play on cement offering truly pan-India presence.
- The stock is valued at 14.8x CY11E EPS, 7.6x CY11E EV/EBITDA and US$111/ton (~30MT capacity). Maintain Buy with target price of Rs1,234 (~10x CY11E EV/EBITDA).
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