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Cement: Sell ACC
Due to delay in commissioning of expansion projects, ACC witnessed a negative volume growth of 1%
for YTD FY11, against industry growth of 5%
Driven by low prices (due to industry capacity utilization remaining low at 80%) and rising cost
pressures (particularly power & fuel and logistics costs), we expect margins to remain under pressure
in CY11 (EBITDA/ton of Rs 824, flat yoy)
We expect ACC’s margins to improve in CY12 as capacity utilizations in the industry improve (85% in
FY13). However we believe that the current valuation (8.5x CY11 EV/EBITDA) is expensive and
already reflects this profitability recovery. We have a SELL rating on the stock with a TP of Rs 905 (7x
CY11E EV/ EBITDA)
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