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4QCY10 results
ACC’s 4Q Ebitda declined 41% YoY to Rs2.6bn, 19% below our estimates.
While realisations were marginally better (+3% QoQ), costs were higher
than estimates. Despite a sequential improvement, Ebitda margins
remained under pressure at Rs460/t. ACC’s volume growth should pick
up in CY11 as both expansions have come on-stream and the capacity
now stands at 30mt. We however expect pricing pressures to impact
earnings over the next few quarters; cut our earning estimates by 5-7%
as we change our cost assumptions; maintain Upf.
4Q performance below estimates due to higher costs
ACC’s 4Q Ebitda declined 41% YoY to Rs2.6bn, 19% below our estimates.
While volumes (5.6mt; +5% YoY) were marginally lower, blended realisations
(Rs174/bag; +3% QoQ) were higher. Higher than expected employee costs
(+27% QoQ), other expenses (+20%; certain year-end adjustments), unit
freight costs (+15%) however impacted. Unit material costs also rose 19%
QoQ while power & fuel were up 8%. Other income rose 88% consequent to
certain write backs and tax rates declined to 27% (cf. 30% in 9m). Reported
net earnings declined 9% as there were write backs of Rs820m.
While front ended capacity should drive volume growth in 2011…
ACC’s volumes in 2010 were impacted due to capacity constraints as it
reported a ~1% decline in volumes. The company has announced
commissioning of its new Wadi project (3mt; south) while Chanda (3mt;
west) is likely to ramp-up in 1H-2011. This should help volumes in 2011 and
we therefore model in a ~9% YoY rise in ACC’s volumes.
… cost/pricing pressures would keep margins under pressure
ACC’s Ebitda margins declined 35% YoY to Rs760/t in CY10 due to pricing
pressures as well as higher costs. We expect demand-supply imbalance to
continue over the next few quarters which would keep its realisations
depressed. Cost pressures (higher coal px; 4% rise in railway freight from
Dec) would be further margin headwind. Post changes in our cost estimates,
we expect Ebitda margins to decline 9% YoY to Rs680/t in CY11 which would
be the lowest in the last five years.
Cut estimates by 5-7%; maintain Upf.
We cut our EPS estimates by 5-7% over CY11-12 to factor in higher costs. We
remain concerned on the sector fundamentals given rising capacity surpluses.
Current valuations (9x one year forward EV/Ebitda; US$120/t) do not factor
in weak fundamentals, in our view. Maintain Upf.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
4QCY10 results
ACC’s 4Q Ebitda declined 41% YoY to Rs2.6bn, 19% below our estimates.
While realisations were marginally better (+3% QoQ), costs were higher
than estimates. Despite a sequential improvement, Ebitda margins
remained under pressure at Rs460/t. ACC’s volume growth should pick
up in CY11 as both expansions have come on-stream and the capacity
now stands at 30mt. We however expect pricing pressures to impact
earnings over the next few quarters; cut our earning estimates by 5-7%
as we change our cost assumptions; maintain Upf.
4Q performance below estimates due to higher costs
ACC’s 4Q Ebitda declined 41% YoY to Rs2.6bn, 19% below our estimates.
While volumes (5.6mt; +5% YoY) were marginally lower, blended realisations
(Rs174/bag; +3% QoQ) were higher. Higher than expected employee costs
(+27% QoQ), other expenses (+20%; certain year-end adjustments), unit
freight costs (+15%) however impacted. Unit material costs also rose 19%
QoQ while power & fuel were up 8%. Other income rose 88% consequent to
certain write backs and tax rates declined to 27% (cf. 30% in 9m). Reported
net earnings declined 9% as there were write backs of Rs820m.
While front ended capacity should drive volume growth in 2011…
ACC’s volumes in 2010 were impacted due to capacity constraints as it
reported a ~1% decline in volumes. The company has announced
commissioning of its new Wadi project (3mt; south) while Chanda (3mt;
west) is likely to ramp-up in 1H-2011. This should help volumes in 2011 and
we therefore model in a ~9% YoY rise in ACC’s volumes.
… cost/pricing pressures would keep margins under pressure
ACC’s Ebitda margins declined 35% YoY to Rs760/t in CY10 due to pricing
pressures as well as higher costs. We expect demand-supply imbalance to
continue over the next few quarters which would keep its realisations
depressed. Cost pressures (higher coal px; 4% rise in railway freight from
Dec) would be further margin headwind. Post changes in our cost estimates,
we expect Ebitda margins to decline 9% YoY to Rs680/t in CY11 which would
be the lowest in the last five years.
Cut estimates by 5-7%; maintain Upf.
We cut our EPS estimates by 5-7% over CY11-12 to factor in higher costs. We
remain concerned on the sector fundamentals given rising capacity surpluses.
Current valuations (9x one year forward EV/Ebitda; US$120/t) do not factor
in weak fundamentals, in our view. Maintain Upf.
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