Accumulate ACC; target of Rs 1650: Prabhudas Lilladher
Prabhudas Lilladher’s research report on ACC
ACC posted Q3CY19 EBITDA below our estimates by 4% due to weaker than expected realisations but ahead of consensus estimates by 7%. Weak realisations were partially offset by lower RM and S,G&A costs. Demand remained sluggish across the regions due to prolonged monsoon, weak sentiments and lower govt spending. We expect revival in demand in H2FY19 though at a very slow pace on the back of measures undertaken by govt to release contractor dues, increase infra spending and improve liquidity. Nevertheless, All-India demand growth would stuck in the range of 2-3% for FY20E. Weak demand recovery would increasingly put pressure on prices in H2FY19 given the peak period of activity and intense competitive intensity.
We cut our EBITDA estimates for CY19e/CY20e by 7%/9% to factor in lower realisations. Given the low upside potential, we downgrade the stock to Accumulate with TP of Rs1,650 (earlier Rs1,790), EV/EBITDA of 11x CY20e.
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