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UBS Investment Research
ACC Limited
Q 2CY11 results: Largely in-line
Event: 2QCY11 Results largely in-line with UBS-e and consensus estimates
ACC reported Q2CY11 net sales of Rs25.4bn (+17% YoY, -1% YoY), operating
profit of Rs5.5bn (-1% YoY, -19% YoY; in-line with UBS-e of Rs5.6bn and
consensus estimate of Rs5.3bn) and PAT (Consolidated) of Rs3.3bn (-6% YoY,
-30% YoY; UBS-e/consensus estimate of Rs3.5/3.1bn).
Impact: Sharp increase in power and fuel costs
Cement realizations increased by about 4% QoQ (5% YoY) in the quarter. There
has been a sharp increase of 63% QoQ (28% YoY) in power and fuel cost per ton.
Operating cost per ton increased by about 10% QoQ primarily led by the increase
in power and fuel costs as well as 11% QoQ increase in staff cost. The
EBITDA/ton declined by about 16% QoQ due to the same. EBITDA margin
declined 490bps QoQ to 21.6% (in line with UBS-e and consensus estimates).
Action: Seasonal weakness likely to impact profitability
Q2CY11 cement volumes increased by 13% YoY (-4% YoY) to 5.9mt on the back
of additional capacity commissioning (other companies like Ambuja and Ultratech
have reported a decline in volumes YoY in the quarter). While Q1 is a strong
quarter for cement companies, Q2 is the weakest quarter due to low construction
activity in the monsoon period (volumes and prices remain under pressure).
Valuation: Sell rating with PT of Rs960
We value ACC at a one-year forward EV/EBITDA of 6.5x.
ACC Limited
ACC is primarily engaged in manufacturing cement and ready-mixed concrete.
It is India's second largest cement manufacturer with 26mt capacity. Most of its
capacity is in south, north and east India. In addition to the core business, the
company has interests in manufacturing refractory material, and providing
research and consultancy services on the cement business. The Holcim group
holds the controlling stake in ACC. Holcim had 48mt capacity in India in 2009
via ACC and Ambuja Cement, in which it has a majority stake.
Statement of Risk
We believe the principal risk to cement companies earning estimates arises from
fall in cement prices and rise in raw material prices.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
ACC Limited
Q 2CY11 results: Largely in-line
Event: 2QCY11 Results largely in-line with UBS-e and consensus estimates
ACC reported Q2CY11 net sales of Rs25.4bn (+17% YoY, -1% YoY), operating
profit of Rs5.5bn (-1% YoY, -19% YoY; in-line with UBS-e of Rs5.6bn and
consensus estimate of Rs5.3bn) and PAT (Consolidated) of Rs3.3bn (-6% YoY,
-30% YoY; UBS-e/consensus estimate of Rs3.5/3.1bn).
Impact: Sharp increase in power and fuel costs
Cement realizations increased by about 4% QoQ (5% YoY) in the quarter. There
has been a sharp increase of 63% QoQ (28% YoY) in power and fuel cost per ton.
Operating cost per ton increased by about 10% QoQ primarily led by the increase
in power and fuel costs as well as 11% QoQ increase in staff cost. The
EBITDA/ton declined by about 16% QoQ due to the same. EBITDA margin
declined 490bps QoQ to 21.6% (in line with UBS-e and consensus estimates).
Action: Seasonal weakness likely to impact profitability
Q2CY11 cement volumes increased by 13% YoY (-4% YoY) to 5.9mt on the back
of additional capacity commissioning (other companies like Ambuja and Ultratech
have reported a decline in volumes YoY in the quarter). While Q1 is a strong
quarter for cement companies, Q2 is the weakest quarter due to low construction
activity in the monsoon period (volumes and prices remain under pressure).
Valuation: Sell rating with PT of Rs960
We value ACC at a one-year forward EV/EBITDA of 6.5x.
ACC Limited
ACC is primarily engaged in manufacturing cement and ready-mixed concrete.
It is India's second largest cement manufacturer with 26mt capacity. Most of its
capacity is in south, north and east India. In addition to the core business, the
company has interests in manufacturing refractory material, and providing
research and consultancy services on the cement business. The Holcim group
holds the controlling stake in ACC. Holcim had 48mt capacity in India in 2009
via ACC and Ambuja Cement, in which it has a majority stake.
Statement of Risk
We believe the principal risk to cement companies earning estimates arises from
fall in cement prices and rise in raw material prices.
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