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August 2, 2011
ACC
Performance Highlights
Y/E Dec. (` cr) Net sales Operating profit OPM (%) Net profit 2QCY2011 1QCY2011 % chg qoq 2QCY2010 % chg yoy
2,403 580 24.1 337 2,398 580 24.2 351 0.2 0.1 (3)bp (4.0) 2,021 594 29.4 359 18.9 (2.4) (527)bp (6.2)
NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Cement 18,886 0.7 1143/814 68936 10 18,110 5,457 ACC.BO ACC@IN
`1,026 -
For 2QCY2011, ACC posted a 6.2% decline in its bottom line; however, it was ahead of our estimates. The bottom-line decline was despite higher realisations, as the company faced margin pressure on account of higher power and fuel costs and freight costs. During the quarter, ACC faced the full impact of the domestic coal price hike carried out by Coal India. Realisation was higher as cement prices, which touched the peak in March 2011 remained strong until May. At current levels, we maintain our Neutral view on the stock. OPM at 24.1%, down 527bp yoy: ACC posted an 18.9% yoy growth in net sales to `2,403cr on account of growth in dispatches and better realisation. The companys dispatches for the quarter stood at 5.9mn tonnes, up 12.5% yoy, on account of higher capacity (on a yoy basis) operational at Wadi and Chanda during the quarter. However, on a sequential basis, dispatches declined by 3.7%, indicating the lukewarm demand scenario. Realisation also improved by 5.7% yoy and 4.1% qoq to `4,052/tonne. Outlook and valuation: All-India cement dispatches, which witnessed a marginal decline in 1QFY2012, are expected to pick-up post the monsoons. Demand growth is expected to be driven by infrastructure activities with FY2012 being the last year of the Eleventh Plan. However, the ongoing SFIO investigation on cement pricing might soften the extent of price recovery. We expect ACC to register a 16.0% CAGR in its top line over CY201012, aided by capacity addition. However, the bottom line is expected to grow at a lower CAGR of 4.6% over the mentioned period due to higher operating costs. At current levels, the stock is trading at EV/EBITDA of 6.8x and EV/tonne of US$110, based on CY2012 estimates. We maintain our Neutral view on the stock, as we believe it is fairly priced.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 50.3 19.3 15.7 14.7
3m (4.7)
1yr 0.2
(8.4) 20.5
CY2009 8,027 10.2 1,607 27.3 32.9 85.5 11.8 3.1 29.4 36.3 1.9 122 26 5.9
CY2010 7,717 (3.9) 1,120 (30.3) 23.5 59.6 16.9 2.9 17.9 19.9 2.0 125 27 8.5
CY2011E 9,179 18.9 1,107 (1.2) 21.2 58.9 17.1 2.6 16.2 19.1 1.7 116 30 8.2
CY2012E 10,387 13.2 1,226 10.8 21.3 65.3 15.4 2.4 16.2 20.4 1.5 110 30 6.8
V Srinivasan
022-39357800 Ext 6831 v.srinivasan@angelbroking.com
2,403
30 25 20
100 3QCY10
256 4QCY10
351
337
15 10
1QCY11
OPM (RHS)
2QCY11
Net Sales
Reported (PAT)
August 2, 2011
Performance highlights
Robust top-line growth
ACC reported a robust performance on the top-line front during the quarter on account of strong growth in dispatches and better realisation. During the quarter, the companys dispatches rose by 12.5% yoy. Growth in dispatches was on account of capacity additions carried out by the company at Wadi and Chanda. During the quarter, ACC reported a 5.7% yoy increase in realisation; while on a qoq basis, realisation was higher at 4.1%.
2QCY11 1QCY11 4QCY10 yoy chg (%) qoq chg (%) 4,052 959 587 845 928 3,893 777 559 807 900 3,834 746 512 823 1049 5.7 28.5 14.6 2.6 (11.6) 4.1 23.5 5.1 4.6 3.1
August 2, 2011
Investment arguments
Growth to be driven by capacity addition
Post the expansion of Wadi plant and the commissioning of the 3mtpa Chanda plant, ACCs total capacity stands at 30mtpa. The companys capacity has increased by ~7mtpa since CY2008-end. The companys capacity additions are expected to drive its growth going ahead, as reflected by the 11.4% yoy increase in its dispatches during 1HCY2011.
(mtpa)
10
Increased use of captive power to result in lower power and fuel costs
ACCs captive power capacity (CPC) stands at 336MW. The company expects to add another 25MW plant in 2011. Increased use of Captive power has improved ACCs cost competitiveness and quality of power. The share of captive power in the companys overall power consumption increased to 74% in CY2010 from 70% in CY2009 and 64% in CY2008. Over the years, ACC has improved its efficiency, owing to which its power consumption/tonne of cement has declined.
August 2, 2011
Revised estimates CY11E 30 79 867 649 815 CY12E 30 87 894 682 852 30 85
CY12E
CY2011E Earlier 8,913 7,229 1,840 472 69 1,433 401 1,032 Revised 9,179 7,390 1,944 472 69 1,537 430 1,107 Var. (%) 3.0 2.2 5.7 0.1 (0.4) 7.3 7.4 7.3 Earlier 10,160 8,183 2,133 492 70 1,731 562 1,170
CY2012E Revised 10,387 8,326 2,217 492 70 1,815 589 1,226 Var. (%) 2.2 1.7 3.9 0.0 (0.3) 4.9 4.8 4.8
August 2, 2011
EV (` cr)
20,000
10,000
EV ( ` cr)
20,000
10,000
ACC* Ambuja Cements* India Cement JK Lakshmi Madras Cement UltraTech Cement
52 -
19.0 -
August 2, 2011
August 2, 2011
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Key ratios
Y/E Dec. Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value DuPont Analysis (%) EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) 23.0 74.5 2.0 33.7 34.6 54.5 33.6 1.4 35.3 13.1 128.6 (21.5) (0.3) (0.6) 67.3 19.8 70.7 2.0 27.3 26.9 55.4 26.7 1.3 38.2 15.0 158.6 (39.8) (0.2) (0.7) 36.0 28.1 70.0 1.8 35.1 36.3 90.8 29.4 1.3 35.0 11.4 193.4 (57.0) (0.2) (0.5) 27.3 17.8 76.6 1.6 21.6 19.9 50.7 17.9 1.1 38.8 8.7 203.1 (83.3) (0.3) (1.0) 25.0 15.8 72.0 1.9 21.2 19.1 40.6 16.2 1.1 44.2 8.1 194.2 (78.3) (0.3) (1.3) 21.4 16.4 67.6 2.0 22.5 20.4 40.9 16.2 1.1 50.2 9.3 186.9 (66.1) (0.4) (1.4) 24.7 76.6 76.6 92.8 23.4 221.1 67.2 67.2 82.8 23.4 262.3 85.5 85.5 103.7 26.9 320.1 59.6 59.6 80.5 35.5 344.2 58.9 58.9 84.0 20.5 382.6 65.3 65.3 91.4 22.8 425.1 13.1 10.8 4.5 2.3 2.5 9.1 3.5 15.0 12.1 3.8 2.3 2.3 9.5 2.9 11.8 9.7 3.1 2.7 1.9 5.9 2.2 16.9 12.5 2.9 3.5 2.0 8.5 2.1 17.1 12.0 2.6 2.0 1.7 8.2 2.0 15.4 11.0 2.4 2.3 1.5 6.8 1.7 CY07 CY08 CY09 CY10 CY11E CY12E
Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Interest)
August 2, 2011
10
E-mail: research@angelbroking.com
Website: www.angelbroking.com
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
ACC No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
August 2, 2011
11