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ACC
PRICE: RS.1389 RECOMMENDATION: REDUCE
TARGET PRICE: RS.1246 CY12E PE : 19.4X
q Revenues for Q4CY11 and CY11 registered a growth of 28% and 22%
YoY respectively led by improvement in cement volumes and realizations.
This was inline with our expectations. Cement realizations for the
quarter as well as full year were also inline with our estimates.
q Operating margins for Q4CY11 and full year CY11 stood below our expectations
due to steep increase in overall costs.
q Net profit for Q4CY11 was boosted by tax write back of Rs 2279 mn related
to previous years resulting which net profits registered a growth of
86% YoY.
q We tweak our estimates to factor in higher cement realizations and
higher costs. We arrive at a revised price target of Rs 1246 (Rs 1086 earlier)
after factoring in 10% improvement in cement prices from current
levels, 10% improvement in cement volumes and better margins. Stock
has moved up quite sharply in recent past and is factoring in improved
cement pricing scenario. At current price of Rs 1389, stock is trading at
19.4x P/E and 10x EV/EBITDA multiples on CY12 estimates. We continue
to maintain REDUCE recommendation on the company
Revenue growth inline with our estimates
n Company's revenues for Q4CY11 and CY11 were in line with our estimates and
registered a growth of 28% and 22% YoY respectively led by improvement in
cement volumes and realizations.
n Dispatches of the company witnessed an improvement of 8.4% and 12% for
Q4CY11 and CY11 respectively on YoY basis. Dispatch growth for ACC has outperformed
the industry due to commissioning of its new capacities at Wadi and
Chanda.
n Net realizations for Q4CY11 and CY11 stood at Rs 4206 per tonne and Rs 3978
per tonne respectively. Improvement in cement prices during Q4CY11 was due
to price hikes incorporated by companies during Oct-Nov, 2011. However, despite
low demand growth, cement prices stayed stable during these two months.
n Since production has stabilized from the new line at Chanda and Wadi plant, we
expect volumes to witness an improvement going forward. We expect volumes
to grow to 26MT in CY12 and expect pricing to improve by 10% next year.
Operating margins declined due to higher costs
n Operating margins for Q4CY11 and full year CY11 stood below our expectations
due to steep increase in overall costs.
n EBITDA/tonne during the quarter stood at Rs 654 per tonne as against Rs 380 per
tonne during Q4CY10. However, fr the full year CY11, EBITDA/tone remained
largely flat despite improvement in cement prices due to increase in raw material,
power and fuel and other expenditure.
n Raw material costs moved up due to higher fly ash and gypsum prices. Fly ash
moved up by Rs 169 per tonne and gypsum has moved up by Rs 320 per tonne
during the year. Power and fuel costs also moved up due to increase in production
as well as higher prices of coal coupled with increase in purchased power
tariff. Power and fuel costs are likely to remain high going forward also. For the
full year, freight costs moved up due to increase in freight rates as well as sales
volumes.
n We tweak our estimates and expect EBITDA/tonne of Rs 859 for CY12, translating
into operating margins of 19.9% for CY12.
Net profit growth boosted by tax credit
n Net profit performance was marginally better than our estimates due to higher
other operating income as well as lower tax rate. Net profit for Q4CY11 was
boosted by tax write back of Rs 2279 mn related to previous years resulting
which net profits registered a growth of 86% YoY.
n However performance of the company at PBT level is lower than our expectations.
n We tweak our estimates and expect net profits to grow to Rs 13.4 bn for
CY12(against Rs 13.6 bn earlier)
Valuation and recommendation
n At current price of Rs 1389, stock is trading at 19.4x P/E and 10x EV/EBITDA
multiples on CY12 estimates
n We tweak our estimates to factor in higher cement realizations and higher costs.
We arrive at a revised price target of Rs 1246 (Rs 1086 earlier) after factoring in
10% improvement in cement prices from current levels, 10% improvement in
cement volumes and better margins.
n Stock has moved up quite sharply in recent past and is factoring in improved
cement pricing scenario.
n We continue to maintain REDUCE recommendation on the company.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ACC
PRICE: RS.1389 RECOMMENDATION: REDUCE
TARGET PRICE: RS.1246 CY12E PE : 19.4X
q Revenues for Q4CY11 and CY11 registered a growth of 28% and 22%
YoY respectively led by improvement in cement volumes and realizations.
This was inline with our expectations. Cement realizations for the
quarter as well as full year were also inline with our estimates.
q Operating margins for Q4CY11 and full year CY11 stood below our expectations
due to steep increase in overall costs.
q Net profit for Q4CY11 was boosted by tax write back of Rs 2279 mn related
to previous years resulting which net profits registered a growth of
86% YoY.
q We tweak our estimates to factor in higher cement realizations and
higher costs. We arrive at a revised price target of Rs 1246 (Rs 1086 earlier)
after factoring in 10% improvement in cement prices from current
levels, 10% improvement in cement volumes and better margins. Stock
has moved up quite sharply in recent past and is factoring in improved
cement pricing scenario. At current price of Rs 1389, stock is trading at
19.4x P/E and 10x EV/EBITDA multiples on CY12 estimates. We continue
to maintain REDUCE recommendation on the company
Revenue growth inline with our estimates
n Company's revenues for Q4CY11 and CY11 were in line with our estimates and
registered a growth of 28% and 22% YoY respectively led by improvement in
cement volumes and realizations.
n Dispatches of the company witnessed an improvement of 8.4% and 12% for
Q4CY11 and CY11 respectively on YoY basis. Dispatch growth for ACC has outperformed
the industry due to commissioning of its new capacities at Wadi and
Chanda.
n Net realizations for Q4CY11 and CY11 stood at Rs 4206 per tonne and Rs 3978
per tonne respectively. Improvement in cement prices during Q4CY11 was due
to price hikes incorporated by companies during Oct-Nov, 2011. However, despite
low demand growth, cement prices stayed stable during these two months.
n Since production has stabilized from the new line at Chanda and Wadi plant, we
expect volumes to witness an improvement going forward. We expect volumes
to grow to 26MT in CY12 and expect pricing to improve by 10% next year.
Operating margins declined due to higher costs
n Operating margins for Q4CY11 and full year CY11 stood below our expectations
due to steep increase in overall costs.
n EBITDA/tonne during the quarter stood at Rs 654 per tonne as against Rs 380 per
tonne during Q4CY10. However, fr the full year CY11, EBITDA/tone remained
largely flat despite improvement in cement prices due to increase in raw material,
power and fuel and other expenditure.
n Raw material costs moved up due to higher fly ash and gypsum prices. Fly ash
moved up by Rs 169 per tonne and gypsum has moved up by Rs 320 per tonne
during the year. Power and fuel costs also moved up due to increase in production
as well as higher prices of coal coupled with increase in purchased power
tariff. Power and fuel costs are likely to remain high going forward also. For the
full year, freight costs moved up due to increase in freight rates as well as sales
volumes.
n We tweak our estimates and expect EBITDA/tonne of Rs 859 for CY12, translating
into operating margins of 19.9% for CY12.
Net profit growth boosted by tax credit
n Net profit performance was marginally better than our estimates due to higher
other operating income as well as lower tax rate. Net profit for Q4CY11 was
boosted by tax write back of Rs 2279 mn related to previous years resulting
which net profits registered a growth of 86% YoY.
n However performance of the company at PBT level is lower than our expectations.
n We tweak our estimates and expect net profits to grow to Rs 13.4 bn for
CY12(against Rs 13.6 bn earlier)
Valuation and recommendation
n At current price of Rs 1389, stock is trading at 19.4x P/E and 10x EV/EBITDA
multiples on CY12 estimates
n We tweak our estimates to factor in higher cement realizations and higher costs.
We arrive at a revised price target of Rs 1246 (Rs 1086 earlier) after factoring in
10% improvement in cement prices from current levels, 10% improvement in
cement volumes and better margins.
n Stock has moved up quite sharply in recent past and is factoring in improved
cement pricing scenario.
n We continue to maintain REDUCE recommendation on the company.
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