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ACC 4QCY2011 performance highlights and results update

Contributed by Angel Broking

For 4QCY2011, ACC reported better-than-expected bottom-line performance. The company’s net profit grew by 83.8% yoy to Rs.470cr. Bottom-line growth was on account of increased cement volumes, Rs.228cr (Rs.82cr in 4QCY2010) reversal of excess tax provisions pertaining to earlier years and higher other income (89.2% yoy to Rs.46cr). Although the company witnessed a substantial 20.3% yoy improvement in realization, its OPM stood flat on a yoy basis due to the surge inpower and fuel costs and freight costs. At current levels, we maintain our Neutral view on the stock.

OPM at 17.7%, impacted severely by cost pressures: During 4QCY2011, ACC posted 27.8% yoy growth in its standalone net sales to Rs.2,503cr. The company’s dispatches for the quarter stood at 5.95mn tonnes, up 6.3% yoy. Realization was also higher by 20.3% yoy at Rs.4,206/tonne. ACC’s per tonne power and fuel and freight costs rose by 21.7% and 18.3% yoy, respectively, thereby keeping margins under pressure despite the yoy improvement in realization and, hence, OPM stood flat on a yoy basis at 17.7%.

Outlook and valuation: We expect ACC to register 12.5% yoy growth in its top line in CY2012E, aided by capacity addition. However, the bottom line is expected to remain flat yoy due to higher base (lower effective tax rate in CY2011). At current levels, the stock is trading at EV/tonne of US$142 on current capacity (US$140 on CY2012E capacity), which in our view is fair. Hence, we continue to remain Neutral on the stock.