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ACC a market performer: HDFC Sec

Thursday, April 19, 2007

ACC reported Q1 CY07 numbers in line with our expectations. With sales volume taking a dip by 2.5% YoY, to 4.93 mn tonnes and realization improving by 32.9% YoY, to Rs. 164/50 kg bag, the Net Sales of the company was up 26.2% YoY, to Rs. 16748 mn. As a result, the EBITDA margins improved by 655 bps to 30.3% and the PAT was up by 54.5% to Rs. 3638 mn.

To address the need for incremental capacity, ACC has undertaken expansion plans. This will increase its capacity from the current 19.9 Mn TPA to 27.5 Mn TPA, by the end of CY09. Of this, 3.18 Mn TPA is expected to come on board in the current year CY07, 1.4 Mn TPA in CY08 and another 3.0 Mn TPA in CY09.

With no amicable settlement to the deadlock between the industry and the government, the latter’s recent move to withdraw the CVD and Special Additional Duty on import of cement, has further depressed the sentiment in the industry. With the industry still holding on to its stand of freezing cement prices for one year and the Rs. 10 per bag correction in cement prices expected in CY08 due to fresh capacities coming on board, we maintain our cautious stand on the sector.

As per our estimates, ACC is likely to do an EPS of Rs. 72.8 in CY07 and Rs. 65.8 in CY08, thereby showing a growth of 11.6% in CY07 and a de-growth of (9.7)% in CY08. The stock currently trades at a PE of 10.8x CY07 and 12.0x CY08 EPS estimates. EV/EBITDA works out to 6.8x CY07 and 6.9x CY08. The EV/tonne works out to USD 146 CY07 and USD 132 CY08 estimates, which in our opinion is fair, considering the current scenario. Therefore we rate the stock as a Market Performer.

Posted by FR at 4:45 PM  

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Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.