ACC- Price hikes to improve margins-Upgrade to Accumulate :Emkay,

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ACC

Price hikes to improve margins-Upgrade to Accumulate

ACCUMULATE

CMP: Rs1,184                                        Target Price: Rs1,290

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n     EBITDA of Rs2.2bn (+30% yoy) below est dragged by higher P&F costs (Rs972/t +30% yoy) & higher other expenses (Rs5.2bn vs est of Rs4.78bn). Total cost/t up 12% at Rs3394

n     Revenues in line- up 31.3% yoy fuelled by 18% volume growth and 11.5% jump in realizations (led by minimal seasonal drop in prices in south , 20% of ACC’s sales)

n     Downgrade CY11EPS by 2.4% led by higher costs. However momentum in cement price hikes (Oct-11 prices already up Rs18-20/bag from Q3CY11 avg) lead to higher exit realizations driving 2.8% upgrade in CY12 earnings

n     Introduce CY13 EPS at Rs87. Improving margins with minimal capex to drive significant FCF & healthy volume growth to improve return ratios. Upgrade to Accumulate -revised target to Rs1290 by rolling over valuations to CY13