ACC- Better realizations drive numbers HOLD :Emkay

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ACC

Better realizations drive numbers

HOLD

CMP: Rs1,020                                        Target Price: Rs1,100

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n     Q2CY11 EBIDTA at Rs5.5 bn, better than est (Rs5.2) led by higher realizations- Higher exit prices for Q1CY11 sustained in April & pushed quarter avg realizations to Rs4052/t (+5.7% yoy,4.1% qoq) v/s est of Rs3956

n     EBITDA/t at Rs928 (+3% qoq). Effect of domestic coal price hikes visible -P&F cost at Rs959/t +24% qoq. Total cost increase 4.4% qoq to Rs3124/t, negatively surprised us

n     Cement demand remain sluggish –prices down ~Rs20/bag from Aprill-11 peaks. New mining tax could be another blow- could increase limestone & coal cost. However ACC’s healthy volumes (+12.5% yoy for Q2) to help contain margin decline

n     Downgrade CY11E/12E earnings by 6%/4.2% to factor high cost pressures. Valuation at PER of 14.7X & EV/ton of USD113 on CY12E- Maintain HOLD with revised TP of Rs1100