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ACC Ltd.
C2Q11: Higher Realizations
Drive Earnings Beat
Quick Comment –Impact on our views: ACC reported
strong earnings for QE Jun-11 of Rs3.4bn, ahead of our
and consensus’ expectation. The beat was driven by
higher-than-expected realization while costs were
broadly in line with our estimate. In the near term,
cement prices and demand are likely to be under
pressure given seasonal factors and muted underlying
demand. Given lack of near-term catalyst for the stock,
we retain our EW rating.
What's new: ACC reported QE Jun-11 results ahead of
our and Street estimates. Revenue grew 19% YoY to
Rs24bn driven by 13% volume growth and supported by
6% pricing gains. Revenue was flat sequentially as a 4%
volume decline was compensated for by a similar price
gain, ahead of our estimate of a 3% gain. EBITDA
margin on a sequential basis declined 20bp to 22.9% but
were better relative to our estimate of 22.3%. YoY
margin has declined by 450bp given rise in key costs like
coal and freight. EBITDA was flat both YoY and QoQ at
Rs5.5bn, but was marginally ahead of MSe of Rs5.3bn.
PAT declined by 6% YoY and 4% QoQ to Rs3.4bn on
the higher tax rate.
Robust volume progression on the back of capacity
commissioning: ACC reported volume growth of 13%
YoY to 5.9mnt, significantly ahead of the industry trend
of 0-1% for QE Jun-11. This was predominantly due to
commissioning of two new plants by the company in the
last few months. In our view, while ACC would grow
ahead of the industry for C2011, the current difference
could moderate somewhat in coming quarters.
Improved realizations also supported revenue and
earnings growth: ACC’s average realization for QE
Jun-11 improved by 4% QoQ vs. MS expectation of 3%.
We estimate current prices to be 3-6% lower relative to
the average and see further pricing risk in the current
quarter given muted underlying demand trend coupled
with seasonality. This could lead to some margin
pressure in the near term
Costs increased driven by higher coal prices and freight
rates. ACC’s costs (per ton) increased by 12% YoY and 4% on
a sequential basis. This was led by higher power and fuel cost
and higher freight rates. Power and fuel cost have increased
sharply both on a YoY and QoQ basis. This was primarily
driven by higher coal cost; however, higher clinker production
also resulted in increased per ton fuel cost. In our view, coal
prices have peaked for the company and should be relatively
stable in quarters ahead. Freight cost were flattish per ton on a
QoQ basis, however, this could inch up in the near term given
the recent increase in diesel prices.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ACC Ltd.
C2Q11: Higher Realizations
Drive Earnings Beat
Quick Comment –Impact on our views: ACC reported
strong earnings for QE Jun-11 of Rs3.4bn, ahead of our
and consensus’ expectation. The beat was driven by
higher-than-expected realization while costs were
broadly in line with our estimate. In the near term,
cement prices and demand are likely to be under
pressure given seasonal factors and muted underlying
demand. Given lack of near-term catalyst for the stock,
we retain our EW rating.
What's new: ACC reported QE Jun-11 results ahead of
our and Street estimates. Revenue grew 19% YoY to
Rs24bn driven by 13% volume growth and supported by
6% pricing gains. Revenue was flat sequentially as a 4%
volume decline was compensated for by a similar price
gain, ahead of our estimate of a 3% gain. EBITDA
margin on a sequential basis declined 20bp to 22.9% but
were better relative to our estimate of 22.3%. YoY
margin has declined by 450bp given rise in key costs like
coal and freight. EBITDA was flat both YoY and QoQ at
Rs5.5bn, but was marginally ahead of MSe of Rs5.3bn.
PAT declined by 6% YoY and 4% QoQ to Rs3.4bn on
the higher tax rate.
Robust volume progression on the back of capacity
commissioning: ACC reported volume growth of 13%
YoY to 5.9mnt, significantly ahead of the industry trend
of 0-1% for QE Jun-11. This was predominantly due to
commissioning of two new plants by the company in the
last few months. In our view, while ACC would grow
ahead of the industry for C2011, the current difference
could moderate somewhat in coming quarters.
Improved realizations also supported revenue and
earnings growth: ACC’s average realization for QE
Jun-11 improved by 4% QoQ vs. MS expectation of 3%.
We estimate current prices to be 3-6% lower relative to
the average and see further pricing risk in the current
quarter given muted underlying demand trend coupled
with seasonality. This could lead to some margin
pressure in the near term
Costs increased driven by higher coal prices and freight
rates. ACC’s costs (per ton) increased by 12% YoY and 4% on
a sequential basis. This was led by higher power and fuel cost
and higher freight rates. Power and fuel cost have increased
sharply both on a YoY and QoQ basis. This was primarily
driven by higher coal cost; however, higher clinker production
also resulted in increased per ton fuel cost. In our view, coal
prices have peaked for the company and should be relatively
stable in quarters ahead. Freight cost were flattish per ton on a
QoQ basis, however, this could inch up in the near term given
the recent increase in diesel prices.
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