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Better pricing, cost savings improve margins
ACC reported net sales of | 2398 crore (up 14% YoY, 22% QoQ) in line
with our estimate of | 2385 crore. EBITDA of | 554 crore (down 11% YoY,
up 165% QoQ) was ahead of our estimate of | 410 crore due to lower
than expected power & fuel cost, employee cost and others cost. Hence,
the reported net profit of | 351 crore (down 13% YoY, up 37% QoQ) was
above our estimate of | 243 crore on the back of higher than expected
operating margin and lower than expected tax rate during the quarter.
EBITDA per tonne improved significantly to | 890 per tonne in Q1CY11
(our estimate: | 658 per tonne) from | 375 per tonne in Q4CY10. Going
forward, we expect ~5% YoY increase in realisation each in CY11E and
CY12E but increase in input costs would keep margins under pressure.
Volume increases ~12% YoY (12% QoQ), realisation up 10% QoQ
Sales volume increased ~12% YoY (~12% QoQ) to 6.23 MTPA in
Q1CY11 on account of capacity addition and pick-up in demand
during the quarter. Realisation improved ~10% QoQ to | 3849 per
tonne, which was aided by an increase in cement prices across all
regions during the quarter.
EBITDA/tonne improves ~137% QoQ; declines ~20% QoQ
ACC reported an EBITDA of | 890 per tonne, which declined ~20%
YoY on account of ~11% YoY increase in total cost. However, it
increased significantly by ~137% QoQ on account of ~10%
improvement in realisation coupled with ~6% decline in total cost.
Valuation
At the CMP of | 1124, the stock is trading at 24.9x and 19.4x its CY11E
and CY12E earnings, respectively. The stock is trading at an EV/EBITDA of
12.6x and 10.2x CY11E and CY12E EBITDA, respectively. On an EV/tonne
basis, the stock is trading at $135 and $132 its CY11E and CY12E
capacities, respectively. We are assigning a HOLD rating to the stock with
a revised target price of | 1055 per share. At the target price, the stock is
trading at $125/tonne at CY11E capacity of 30.5 MTPA, which is the
current replacement cost.
Net sales increase on higher volumes, better realisations
Net sales have increased ~14% YoY and ~22% QoQ to | 2398.2 crore in
Q1CY11 on account of an increase in sales volume by ~12% YoY (~12%
QoQ) to 6.2 MTPA and increase in realisation by ~2% YoY (~10% QoQ)
to | 3849 per tonne. The increase in sales volume was aided by capacity
addition by the company along with better utilisation followed by a pickup
in demand during Q1CY11. The realisation increased on account of an
increase in cement prices across all regions during the quarter.
EBITDA margin declines 649 bps YoY but improves 1244 bps QoQ
The total cost has declined ~6% QoQ to | 2960 per tonne primarily on
account of a decline in power & fuel cost, other costs and employee
costs. Power & fuel cost has declined ~5% QoQ to | 768 per tonne on
account of an increase in power consumption through captive sources
and use of low cost coal inventory during the quarter. However, it has
increased ~9% YoY on account of higher coal prices. The employee cost
has declined ~32% QoQ to | 180 per tonne as the company provided
higher provisioning for employee benefits in Q4CY10. The other
expenditure has declined ~19% QoQ to | 877 per tonne. However, it
increased ~11% YoY on account of an increase in repair & maintenance
expenses, royalty, packing material cost and advertising & consultancy
expenses. The freight cost has increased ~12% YoY and ~3% QoQ to |
553 per tonne on account of an increase in freight tariff rates. The raw
material cost has increased ~18% YoY and ~6% QoQ to | 593 per tonne
on the back of an increase in slag, fly ash and gypsum prices.
The total cost has increased ~12% YoY to | 2960 per tonne. Hence, it
dragged down EBITDA by ~20% YoY to | 890 per tonne. Sequentially,
the EBITDA per tonne improved significantly by ~137% as the total cost
declined coupled with an increase in realisation. Thus, the EBITDA margin
has improved sharply by 1244 bps QoQ to 23.1% in Q1CY11 against
10.7% in Q4CY10.
Net profit declines ~13 YoY but increases ~37% QoQ
On a YoY basis, the reported net profit has declined ~13% to | 350.7
crore due to a 649 bps decline in operating margin coupled with ~99%
increase in interest cost and ~20% increase in depreciation. On a QoQ
basis, the net profit increased ~37% on account of a sharp improvement
in operating margin. Other income declined by 57% QoQ to | 66.9 crore
as in Q4CY10. It included | 64.5 crore due to a write-back of provision.
Capex plan
The company has recently commissioned clinker capacity expansion of 3
MTPA at Chanda, Maharashtra. Also, the company has commissioned the
grinding expansion of 12500 TPD at Wadi, Karnataka, which has led to
total installed capacity of 30.5 MTPA. The thermal captive power plant
(CPP) expansion of 25 MW at Wadi, Karnataka was commissioned during
Q4CY10 and the second unit of 25 MW was commissioned during the
quarter.
Valuations
After completion of the 3 MTPA expansion plan at Chanda, Maharashtra,
the installed capacity has reached 30.5 MTPA. Considering the capacity
expansion, we expect volume growth of ~11% CAGR (CY10-12E). The
realisation is expected to improve by 5% YoY each in CY11E and CY12E.
However, the increase in input costs would keep margins under pressure.
We estimate EBITDA of | 621 per tonne in CY11E and | 690 per tonne in
CY12E.
At the CMP of | 1124, the stock is trading at 24.9x and 19.4x its CY11E
and CY12E earnings, respectively. The stock is trading at an EV/EBITDA of
12.6x and 10.2x CY11E and CY12E EBITDA, respectively. On an EV/tonne
basis, the stock is trading at $135 and $132 its CY11E and CY12E
capacities, respectively. We are assigning a HOLD rating to the stock with
a revised target price of | 1055 per share. At the target price, the stock is
trading at $125/tonne at CY11E capacity of 30.5 MTPA, which is the
current replacement cost.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Better pricing, cost savings improve margins
ACC reported net sales of | 2398 crore (up 14% YoY, 22% QoQ) in line
with our estimate of | 2385 crore. EBITDA of | 554 crore (down 11% YoY,
up 165% QoQ) was ahead of our estimate of | 410 crore due to lower
than expected power & fuel cost, employee cost and others cost. Hence,
the reported net profit of | 351 crore (down 13% YoY, up 37% QoQ) was
above our estimate of | 243 crore on the back of higher than expected
operating margin and lower than expected tax rate during the quarter.
EBITDA per tonne improved significantly to | 890 per tonne in Q1CY11
(our estimate: | 658 per tonne) from | 375 per tonne in Q4CY10. Going
forward, we expect ~5% YoY increase in realisation each in CY11E and
CY12E but increase in input costs would keep margins under pressure.
Volume increases ~12% YoY (12% QoQ), realisation up 10% QoQ
Sales volume increased ~12% YoY (~12% QoQ) to 6.23 MTPA in
Q1CY11 on account of capacity addition and pick-up in demand
during the quarter. Realisation improved ~10% QoQ to | 3849 per
tonne, which was aided by an increase in cement prices across all
regions during the quarter.
EBITDA/tonne improves ~137% QoQ; declines ~20% QoQ
ACC reported an EBITDA of | 890 per tonne, which declined ~20%
YoY on account of ~11% YoY increase in total cost. However, it
increased significantly by ~137% QoQ on account of ~10%
improvement in realisation coupled with ~6% decline in total cost.
Valuation
At the CMP of | 1124, the stock is trading at 24.9x and 19.4x its CY11E
and CY12E earnings, respectively. The stock is trading at an EV/EBITDA of
12.6x and 10.2x CY11E and CY12E EBITDA, respectively. On an EV/tonne
basis, the stock is trading at $135 and $132 its CY11E and CY12E
capacities, respectively. We are assigning a HOLD rating to the stock with
a revised target price of | 1055 per share. At the target price, the stock is
trading at $125/tonne at CY11E capacity of 30.5 MTPA, which is the
current replacement cost.
Net sales increase on higher volumes, better realisations
Net sales have increased ~14% YoY and ~22% QoQ to | 2398.2 crore in
Q1CY11 on account of an increase in sales volume by ~12% YoY (~12%
QoQ) to 6.2 MTPA and increase in realisation by ~2% YoY (~10% QoQ)
to | 3849 per tonne. The increase in sales volume was aided by capacity
addition by the company along with better utilisation followed by a pickup
in demand during Q1CY11. The realisation increased on account of an
increase in cement prices across all regions during the quarter.
EBITDA margin declines 649 bps YoY but improves 1244 bps QoQ
The total cost has declined ~6% QoQ to | 2960 per tonne primarily on
account of a decline in power & fuel cost, other costs and employee
costs. Power & fuel cost has declined ~5% QoQ to | 768 per tonne on
account of an increase in power consumption through captive sources
and use of low cost coal inventory during the quarter. However, it has
increased ~9% YoY on account of higher coal prices. The employee cost
has declined ~32% QoQ to | 180 per tonne as the company provided
higher provisioning for employee benefits in Q4CY10. The other
expenditure has declined ~19% QoQ to | 877 per tonne. However, it
increased ~11% YoY on account of an increase in repair & maintenance
expenses, royalty, packing material cost and advertising & consultancy
expenses. The freight cost has increased ~12% YoY and ~3% QoQ to |
553 per tonne on account of an increase in freight tariff rates. The raw
material cost has increased ~18% YoY and ~6% QoQ to | 593 per tonne
on the back of an increase in slag, fly ash and gypsum prices.
The total cost has increased ~12% YoY to | 2960 per tonne. Hence, it
dragged down EBITDA by ~20% YoY to | 890 per tonne. Sequentially,
the EBITDA per tonne improved significantly by ~137% as the total cost
declined coupled with an increase in realisation. Thus, the EBITDA margin
has improved sharply by 1244 bps QoQ to 23.1% in Q1CY11 against
10.7% in Q4CY10.
Net profit declines ~13 YoY but increases ~37% QoQ
On a YoY basis, the reported net profit has declined ~13% to | 350.7
crore due to a 649 bps decline in operating margin coupled with ~99%
increase in interest cost and ~20% increase in depreciation. On a QoQ
basis, the net profit increased ~37% on account of a sharp improvement
in operating margin. Other income declined by 57% QoQ to | 66.9 crore
as in Q4CY10. It included | 64.5 crore due to a write-back of provision.
Capex plan
The company has recently commissioned clinker capacity expansion of 3
MTPA at Chanda, Maharashtra. Also, the company has commissioned the
grinding expansion of 12500 TPD at Wadi, Karnataka, which has led to
total installed capacity of 30.5 MTPA. The thermal captive power plant
(CPP) expansion of 25 MW at Wadi, Karnataka was commissioned during
Q4CY10 and the second unit of 25 MW was commissioned during the
quarter.
Valuations
After completion of the 3 MTPA expansion plan at Chanda, Maharashtra,
the installed capacity has reached 30.5 MTPA. Considering the capacity
expansion, we expect volume growth of ~11% CAGR (CY10-12E). The
realisation is expected to improve by 5% YoY each in CY11E and CY12E.
However, the increase in input costs would keep margins under pressure.
We estimate EBITDA of | 621 per tonne in CY11E and | 690 per tonne in
CY12E.
At the CMP of | 1124, the stock is trading at 24.9x and 19.4x its CY11E
and CY12E earnings, respectively. The stock is trading at an EV/EBITDA of
12.6x and 10.2x CY11E and CY12E EBITDA, respectively. On an EV/tonne
basis, the stock is trading at $135 and $132 its CY11E and CY12E
capacities, respectively. We are assigning a HOLD rating to the stock with
a revised target price of | 1055 per share. At the target price, the stock is
trading at $125/tonne at CY11E capacity of 30.5 MTPA, which is the
current replacement cost.
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