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Recommendations India

ACC 1QCY2014 performance highlights and results update

April 30, 2014, Wednesday, 10:37 GMT | 05:37 EST | 14:07 IST | 16:37 SGT
Contributed by Angel Broking

For 1QCY2014 ACC’s operating profits were in-line with estimates. However, the company’s bottom-line performance was better than estimates due to higher other income.

OPM at 14.3%, down 258bp yoy: During the quarter, ACC’s standalone top-line rose by 1.9% yoy to Rs.2,967cr. While grey cement volume rose by 1.3% yoy to 6.48mn tonne, realization remained flat on a yoy basis at Rs.4,304/tonne. Although the company benefitted out of higher prices in northern and central regions, weak pricing scenario in the south resulted in modest performance on the realization front. Net sales of the RMC division rose by 4.6% yoy to Rs.178cr. The OPM stood at 14.3%, down 259bp on a yoy basis, impacted by higher cost of major inputs such as fly ash and gypsum. Freight cost/tonne too rose by 7.3% on a yoy basis. The Adjusted PAT, after factoring in Rs.113cr of tax credit during the quarter, fell by 3.7% yoy to Rs.286cr.

Outlook and valuation: We expect ACC to register a 12% yoy growth in its top-line over CY2013-15. The bottom-line is expected to grow at a CAGR of 21.9% over the same period. At current levels, the stock is trading at an EV/tonne of US$94 on CY2015E capacity. We recommend an Accumulate on the stock with a target price of Rs.1,485.