Highlights for the quarter

ACC Q1CY06 results were below our expectation on account of higher freight cost and other expenditure. Key Highlights of the result are: Net Sales up 24.7% to Rs.16.7Bn. (Against our estimate of 16.5 bn), EBIDTA up 55% to Rs.5.06bn (as against Rs.5.54bn) and PAT up 51.55 % to Rs.3.43bn (As against Rs.3.8 bn). Operating cost was up 15% to Rs.11.67 bn (as against our estimate of Rs.11 bn) mainly on account of Higher Freight Expenses and Other Expenditure. Adjusted net profit was 51% to 3.43 bn (as against our estimate of Rs 3.84 bn)

Net sales grew 24.7% to Rs.16.7 bn led by 1% degrowth in cement sales and 27% growth in realization (at Rs.3320/ton).

Operating profit increased by 55% y-o-y to Rs.5.06 bn with margin expanding by 591 basis point to 30.25% (against our estimate of 970 basis point) mainly on account of higher freight cost (up 29% to Rs 530 per ton as against our estimate of 17% y-o-y increase at Rs 480 /ton) due to higher lead distance and subdued performance of RMC division (segment loss of Rs 48 million vs. profit of Rs 41 million).

Lower interest cost led to a PBT growth of 67% to Rs.4.68bn. Higher tax curtailed the Adj PAT growth at 54 % to Rs.3.83 bn as against Rs 2.26 bn last years.

On the cost front unit raw material cost increased 9 % y-o-y to Rs.368 per ton, power and fuel cost was up 17 % y-o-y to Rs.553/ton while freight cost increased 30% to Rs.530 per ton and other expenses were up 26% at Rs 668 per ton.

In view of lower than expected Q1CY07 result we revise our CY07 EBIDTA and EPS numbers by.

Grinding Augmentation Project at Tikaria and 0.9 million MT expansion at Lakheri with 25 MW captive power plant have commenced trial production.

The company is in process of transferring its RMC Business into ACC Concrete Ltd a Wholly owned subsidiary, in order to give the business the required focus, and access to resources, for implementing its growth plans.

Valuation