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Buy ACC; target of Rs 1735: Prabhudas Lilladher

April 24
18:25 2019

Prabhudas Lilladher’s research report on ACC

ACC’s Q1CY19 earnings were tad below our estimates due to higher fuel and slag cost. Cement realisations improved by 2.6% (Rs130/t) YoY/+1.6% (Rs80) QoQ. Volume grew 5.5% YoY (estimate of 4.5%) largely driven by double digit volume growth in Eastern region. Benefits from cost optimization were lower than our expectation which coupled with increase in fuel and slag prices led to 2.5 YoY (PLe: 1.7%) increases in cost on per tonne basis. While the profitability is under pressure for the sector due to intense competition, unabated capacity addition and weakness in high margin Trade segment, cement prices continue to remain firm in ACC’s key markets of Central UP, MP, Jharkhand, Odisha, etc thereby fetching higher realisations.

Outlook

Hence, we maintain our earnings estimates for CY20e/CY21e. Given the attractive valuations and improved quality of operations, we maintain BUY with TP of Rs1,735, EV/EBITDA of 13x CY20e.

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