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ACC
Q1 2011: Profits surge qoq, driven by higher realization and stable costs
Healthy volume growth and high realization led to sales
increasing 14.1% yoy and 22.5% qoq.
Higher realization and stable costs helped the company
increase EBITDA per ton sequentially from Rs365/tonne
to Rs900/tonne.
Given subdued demand, we reduce our volume
estimates and increase our realization estimates. As
such, we lower CY11 EPS estimate by 0.7% and for
CY12 raise it by 0.9%.
Maintain OUTPERFORM and roll-forward our price
target to Rs1,170 (earlier Rs1,123).
Healthy volume and realization growth. Dispatches grew
10.4% yoy mainly because it commissioned the Wadi plant
in Karnataka during 4Q CY10 and operated at higher
capacity than peers. Moreover, realization increased 14.0%
qoq on account of producer discipline prevalent in the
industry. Consequently, revenue increased 22.5% qoq and
14.1% yoy.
Costs decreased sequentially. Power and fuel costs didn’t
change much because of steady coal prices. Moreover,
employee costs came down sequentially. All these factors
resulted in operating expenditure falling by approximately
Rs60/tonne. However, on a yoy basis, raw material cost per
tonne increased 17.3% yoy mainly on account of the
increase in slag, fly ash and gypsum prices. Freight costs
also increased both on a sequential and a yoy basis mainly
because of the increase in rail and road tariff.
Revise earnings estimates. We have reduced our volume
estimates by 2m and 1m tonnes for CY11 and CY12,
respectively. At the same time, we have also increased our
realization estimates by Rs200/tonne and Rs160/tonne for
CY11 and CY12, respectively. Consequently, we lower
CY11 EPS estimate by 0.7% and raise CY12 by 0.9%.
Valuation. We use expected capital employed at the end of
2010 and average RoCE over the previous cycle for our
valuation. Since the valuation was done taking Dec ’10
capital employed, we rolled forward our price target by four
months to arrive at the present fair value of Rs1,170.
Risks – Fuel cost increase, lower-than-expected volume
growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ACC
Q1 2011: Profits surge qoq, driven by higher realization and stable costs
Healthy volume growth and high realization led to sales
increasing 14.1% yoy and 22.5% qoq.
Higher realization and stable costs helped the company
increase EBITDA per ton sequentially from Rs365/tonne
to Rs900/tonne.
Given subdued demand, we reduce our volume
estimates and increase our realization estimates. As
such, we lower CY11 EPS estimate by 0.7% and for
CY12 raise it by 0.9%.
Maintain OUTPERFORM and roll-forward our price
target to Rs1,170 (earlier Rs1,123).
Healthy volume and realization growth. Dispatches grew
10.4% yoy mainly because it commissioned the Wadi plant
in Karnataka during 4Q CY10 and operated at higher
capacity than peers. Moreover, realization increased 14.0%
qoq on account of producer discipline prevalent in the
industry. Consequently, revenue increased 22.5% qoq and
14.1% yoy.
Costs decreased sequentially. Power and fuel costs didn’t
change much because of steady coal prices. Moreover,
employee costs came down sequentially. All these factors
resulted in operating expenditure falling by approximately
Rs60/tonne. However, on a yoy basis, raw material cost per
tonne increased 17.3% yoy mainly on account of the
increase in slag, fly ash and gypsum prices. Freight costs
also increased both on a sequential and a yoy basis mainly
because of the increase in rail and road tariff.
Revise earnings estimates. We have reduced our volume
estimates by 2m and 1m tonnes for CY11 and CY12,
respectively. At the same time, we have also increased our
realization estimates by Rs200/tonne and Rs160/tonne for
CY11 and CY12, respectively. Consequently, we lower
CY11 EPS estimate by 0.7% and raise CY12 by 0.9%.
Valuation. We use expected capital employed at the end of
2010 and average RoCE over the previous cycle for our
valuation. Since the valuation was done taking Dec ’10
capital employed, we rolled forward our price target by four
months to arrive at the present fair value of Rs1,170.
Risks – Fuel cost increase, lower-than-expected volume
growth.
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