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New Capacity aids growth
Sales up 14% y-y on 10% volume growth, 3% realizations growth
EBITDA margins improve q-q on higher pricing & lower costs
Capacity expansion at Wadi & Chanda complete, ramp up by 1H11
Reiterate REDUCE on expensive valns & a tough sector outlook
New capacity drives volumes
ACC reported 1Q11 sales of INR25.6b
(up 14.1% y-y, up 22.2% q-q) with a
volume growth of 10.4% y-y (after 3
years of virtually zero growth, aided by
new capacities) and realizations growth
of 3.1% y-y. On a q/q basis realizations
improved by 11.5% due to supply
discipline/price cooperation among
cement vendors. However the company
missed both our sales and EPS
expectations on lower-than-expected
ASPs for the quarter.
Margins rebound q-q, EBITDA declined INR204/t y/y
ACC reported EBTDA/t of INR906/t (down INR204/ty/y, up INR380/t q/q)
driven by realization increase of 11.5%q-q. On a q/q basis ACC saw a
significant rise in raw material costs (up INR179/t q-q, due to higher fly
ash, gypsum and slag costs) which were offset by declines in energy
costs (down INR27.0/t), freight costs (down INR80/t), and employee
costs (down INR84/t) . Net profit came in at INR3.5b (down 10.9% y-y)
with an EPS of INR18.6 versus our EPS of INR21.4.
Capacity expansion complete, ramp-up by 1H11
ACC has commissioned its Wadi capacity of 12500t/day on Sep’10,
along with a 25MW CPP (commissioned in Oct’10). The new clinker
capacity of 7000t/day at Chanda commenced trial production in Nov.
2010; it is expected to ramp up production levels by 1H11.
Reiterate REDUCE, Sector outlook deteriorating
ACC trades at an EV/EBITDA of 10.2x our CY11 EBITDA estimate
versus peers at 9.3x. On an EV/t basis the stock trades at $137/t versus
replacement cost of $105-115. We maintain our REDUCE rating on ACC
on expensive valuations, which do not factor in deteriorating industry
fundamentals. Given 25% oversupply & rising power & fuel and logistics
costs we believe cement industry will see a potential margin squeeze in
CY11. Also, our volume growth assumptions of 10%y-y in FY12 are at
risk of downward revision given weakness in govt. infrastructure projects,
slowing demand growth in large cement consuming states & weak real
estate demand. Key upside risk: consolidation by parent Holcim.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
New Capacity aids growth
Sales up 14% y-y on 10% volume growth, 3% realizations growth
EBITDA margins improve q-q on higher pricing & lower costs
Capacity expansion at Wadi & Chanda complete, ramp up by 1H11
Reiterate REDUCE on expensive valns & a tough sector outlook
New capacity drives volumes
ACC reported 1Q11 sales of INR25.6b
(up 14.1% y-y, up 22.2% q-q) with a
volume growth of 10.4% y-y (after 3
years of virtually zero growth, aided by
new capacities) and realizations growth
of 3.1% y-y. On a q/q basis realizations
improved by 11.5% due to supply
discipline/price cooperation among
cement vendors. However the company
missed both our sales and EPS
expectations on lower-than-expected
ASPs for the quarter.
Margins rebound q-q, EBITDA declined INR204/t y/y
ACC reported EBTDA/t of INR906/t (down INR204/ty/y, up INR380/t q/q)
driven by realization increase of 11.5%q-q. On a q/q basis ACC saw a
significant rise in raw material costs (up INR179/t q-q, due to higher fly
ash, gypsum and slag costs) which were offset by declines in energy
costs (down INR27.0/t), freight costs (down INR80/t), and employee
costs (down INR84/t) . Net profit came in at INR3.5b (down 10.9% y-y)
with an EPS of INR18.6 versus our EPS of INR21.4.
Capacity expansion complete, ramp-up by 1H11
ACC has commissioned its Wadi capacity of 12500t/day on Sep’10,
along with a 25MW CPP (commissioned in Oct’10). The new clinker
capacity of 7000t/day at Chanda commenced trial production in Nov.
2010; it is expected to ramp up production levels by 1H11.
Reiterate REDUCE, Sector outlook deteriorating
ACC trades at an EV/EBITDA of 10.2x our CY11 EBITDA estimate
versus peers at 9.3x. On an EV/t basis the stock trades at $137/t versus
replacement cost of $105-115. We maintain our REDUCE rating on ACC
on expensive valuations, which do not factor in deteriorating industry
fundamentals. Given 25% oversupply & rising power & fuel and logistics
costs we believe cement industry will see a potential margin squeeze in
CY11. Also, our volume growth assumptions of 10%y-y in FY12 are at
risk of downward revision given weakness in govt. infrastructure projects,
slowing demand growth in large cement consuming states & weak real
estate demand. Key upside risk: consolidation by parent Holcim.
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