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UBS Investment Research
ACC Limited
Most impacted by domestic coal price
i ncrease [EXTRACT]
Robust volume growth led by capacity additions and low base
ACC’s dispatches have been robust so far this year (+16% YoY YTD) due to the
combined effect of capacity additions at the Chanda (3mt commissioned in November
2010) and Wadi (expanded capacity commissioned in November 2010) plants and the
low base in 2010 (volumes were flat YoY). All the company’s expansion projects have
been completed and it has not announced any new plans. We forecast volume growth of
13% YoY in 2011 (significantly higher than industry growth of 6%) and 8% in 2012 (in
line with our industry growth estimates).
EBITDA margin decline led by power and fuel costs
Power and fuel cost per ton increased 63% QoQ (28% YoY) in Q211. Operating cost
per ton increased about 10% QoQ, led primarily by the increase in power and fuel costs
as well as an 11% QoQ increase in staff costs. Cement realisations in Q211 increased
about 4% QoQ (5% YoY). The EBITDA margin declined 490bp QoQ to 21.6%.
Among the companies under our coverage, ACC is most reliant on domestic coal and
hence was the most impacted by the domestic price increase.
Revise earnings estimates for 2011/2012/2013
We raise our 2011/2012/2013 EPS estimates from Rs59.80/Rs75.47/Rs82.00 to
Rs68.79/Rs78.35/Rs97.41, led by our higher volume and price realisation assumptions
following the Q211 results.
Valuation: Sell rating with price target of Rs990
We raise our price target from Rs960 to Rs990 due to our higher earnings forecasts. We
now value the company on an EV/EBITDA multiple of 6x (FY13E) (previously 6.5x).
ACC Limited
ACC is primarily engaged in manufacturing cement and ready-mixed concrete.
It is India's second largest cement manufacturer with about 30mt capacity. Most
of its capacity is in south, central and north of the country. The Holcim Group
holds the controlling stake in ACC.
Statement of Risk
We believe the key risk to our outlook for the sector could come from an
unexpected fall in cement prices, increase in input costs, such as coal/freight,
and any government intervention to lower cement prices.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
ACC Limited
Most impacted by domestic coal price
i ncrease [EXTRACT]
Robust volume growth led by capacity additions and low base
ACC’s dispatches have been robust so far this year (+16% YoY YTD) due to the
combined effect of capacity additions at the Chanda (3mt commissioned in November
2010) and Wadi (expanded capacity commissioned in November 2010) plants and the
low base in 2010 (volumes were flat YoY). All the company’s expansion projects have
been completed and it has not announced any new plans. We forecast volume growth of
13% YoY in 2011 (significantly higher than industry growth of 6%) and 8% in 2012 (in
line with our industry growth estimates).
EBITDA margin decline led by power and fuel costs
Power and fuel cost per ton increased 63% QoQ (28% YoY) in Q211. Operating cost
per ton increased about 10% QoQ, led primarily by the increase in power and fuel costs
as well as an 11% QoQ increase in staff costs. Cement realisations in Q211 increased
about 4% QoQ (5% YoY). The EBITDA margin declined 490bp QoQ to 21.6%.
Among the companies under our coverage, ACC is most reliant on domestic coal and
hence was the most impacted by the domestic price increase.
Revise earnings estimates for 2011/2012/2013
We raise our 2011/2012/2013 EPS estimates from Rs59.80/Rs75.47/Rs82.00 to
Rs68.79/Rs78.35/Rs97.41, led by our higher volume and price realisation assumptions
following the Q211 results.
Valuation: Sell rating with price target of Rs990
We raise our price target from Rs960 to Rs990 due to our higher earnings forecasts. We
now value the company on an EV/EBITDA multiple of 6x (FY13E) (previously 6.5x).
ACC Limited
ACC is primarily engaged in manufacturing cement and ready-mixed concrete.
It is India's second largest cement manufacturer with about 30mt capacity. Most
of its capacity is in south, central and north of the country. The Holcim Group
holds the controlling stake in ACC.
Statement of Risk
We believe the key risk to our outlook for the sector could come from an
unexpected fall in cement prices, increase in input costs, such as coal/freight,
and any government intervention to lower cement prices.
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