India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Diversified regional presence…
Second largest cement player
• ACC is the second largest cement manufacturer in India with
installed capacity of 30 million tonnes per annum (MTPA) and ~
11% market share. Recently, Switzerland based Holcim, hiked its
stake in the company to 50.1%
• A pan-India presence (~32% in south, ~20% in north and east
each, ~15% in central and ~13% in west) cushions against any
region specific pricing and demand pressure. The company has
strong brand equity due to its long presence in the Indian markets
• ACC has captive power capacity of ~336 MW, which meets
~80% of the total power requirement
• The company has a strong balance sheet, with CY10 net cash of
~| 2200 crore and low debt equity ratio of ~0.1
Going ahead
• ACC has added ~7 MTPA of new capacity to reach ~30 MTPA in
CY10. We expect the company to expand its capacity further to
maintain its market share in future
• On the back of stabilisation of new capacities with robust demand
outlook for India (~9% CAGR during FY11-15E), the company’s
cement volume is expected to grow in line with the industry
during the same period as against ~2% CAGR during FY07-11
• The company’s realisations are expected to remain firm on the
back of improvement in utilisation rates and its strong brand
equity. Also, its diversified regional presence cushions against
any region specific pricing pressure
• Increasing captive power consumption would help the company
in saving power & fuel cost while high usage of domestic coal
would partially offset the volatility in imported coal prices
• The strong balance sheet provides enough room to expand in the
future. With a low debt equity ratio, we feel the company would
not find it difficult to go ahead with its expansion plans in future.
Valuation
Being a large player with strong brand equity, better return ratios and
strong balance sheet, ACC has always traded at premium valuations to its
peers except Ambuja. Also, during the previous cyclical upturn of FY06-
08, it was trading above $180/tonne, ~80% premium to the replacement
cost of $100/tonne that time. Currently, it is trading at $110/tonne at
CY12E capacity which is ~15% discount to the current replacement cost
of $130/tonne. We believe in the long-term potential of the stock,
considering the robust scenario for the Indian cement industry.
No comments:
Post a Comment