4QCY2011 Result Update | Cement

February 14, 2012

ACC
Performance Highlights
Y/E Dec. (` cr) Net sales Operating profit OPM (%) Net profit
Source: Company, Angel Research

NEUTRAL
CMP Target Price
4QCY2010 1,958 340 17.4 256 % chg yoy 27.8 29.9 28bp 83.8

`1,339 -

4QCY2011 2,503 442 17.7 470

3QCY2011 % chg qoq 2,150 319 14.8 168 16.4 38.4 281bp 180.7

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 25,136 0.7 1422/917 34,786 10 17,849 5,416 ACC.BO ACC@IN

For 4QCY2011, ACC reported better-than-expected bottom-line performance. The companys net profit grew by 83.8% yoy to `470cr. Bottom-line growth was on account of increased cement volumes, `228cr (`82cr in 4QCY2010) reversal of excess tax provisions pertaining to earlier years and higher other income (89.2% yoy to `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 in power 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 `2,503cr. The companys dispatches for the quarter stood at 5.95mn tonnes, up 6.3% yoy. Realization was also higher by 20.3% yoy at `4,206/tonne. ACCs 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.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 50.3 13.1 17.8 18.9

Abs. (%) Sensex ACC

3m 4.3

1yr (1.9)

3yr 85.3

10.3 34.9 133.6

Key financials (Standalone)

Y/E Dec. (` cr) Net sales % chg Net profit % chg OPM (%) FDEPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/tonne (US$) Installed capacity (mtpa) EV/EBITDA (x)
Source: Company, Angel Research

CY2009 8,027 10.2 1,607 27.3 32.9 85.5 15.7 4.2 29.4 36.3 2.7 163 26 8.2

CY2010 7,717 (3.9) 1,120 (30.3) 23.5 59.6 22.5 3.9 17.9 19.9 2.8 164 27 12.0

CY2011E 9,439 22.3 1,325 18.3 20.3 70.5 19.0 3.5 19.4 18.6 2.4 142 30 11.7

CY2012E 10,694 13.3 1,311 (1.1) 20.6 69.8 19.2 3.2 17.4 20.0 2.1 140 30 10.1
Sourabh Taparia 022-39357800 Ext 6872 Sourabh.taparia@angelbroking.com

V Srinivasan
022-39357800 Ext 6831 v.srinivasan@angelbroking.com

Please refer to important disclosures at the end of this report

ACC | 4QCY2011 Result Update

Exhibit 1: 4QCY2011 performance (Standalone)

Y/E Dec. (` cr) Net Revenues Other Operating Income Total Operating Income Net Raw-Material Cost (% of Sales) Power & Fuel (% of Sales) Staff Costs (% of Sales) Freight & Forwarding (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM (%) Interest Depreciation Other Income PBT (incl. Extr. Items) Provision for Taxation (% of PBT) Reported PAT PATM (%) EPS (`) Source: Company, Angel Research 4QCY11 2,503 52 2,555 422 16.9 584 23.3 155 6.2 376 15.0 576 23.0 2,113 442 17.7 19 127 46 341 (129) (37.8) 470 18.8 25.0 3QCY11 2,150 99 2,249 384 17.9 552 25.7 138 6.4 333 15.5 522 24.3 1,930 319 14.8 25 120 57 231 64 27.5 168 7.8 8.9 180.7 1100bp 180.7 9.5 38.4 281bp (24) 5.9 (20.2) 47.6 10.3 13.1 12.5 5.7 % chg qoq 16.4 (46.8) 13.6 9.9 4QCY10 1,958 131 2,089 282 14.4 451 23.1 149 7.6 299 15.3 567 29.0 1,749 340 17.4 14 112 24 239 (17) (7.2) 256 13.1 13.6 83.8 572bp 83.8 20.8 29.9 28bp 39.7 13.5 89.2 43.0 1.5 25.7 4.6 29.3 % chg yoy 27.8 (60.0) 22.3 49.6 CY2011 9,439 222 9,660 1,503 15.9 2,183 23.1 526 5.6 1,402 14.9 2,126 22.5 7,740 1,921 20.3 97 475 192 1,540 215 14.0 1,325 14.0 70.5 CY2010 7,717 258 7,976 1,168 15.1 1,599 20.7 462 6.0 1,070 13.9 1,865 24.2 6,163 1,812 23.5 57 393 98 1,461 341 23.4 1,120 14.5 59.6 18.3 (47)bp 18.3 25.6 6.0 (314)bp 70.7 21.0 94.9 5.4 (37.0) 14.0 31.0 13.8 36.6 % chg yoy 22.3 (14.2) 21.1 28.8

Exhibit 2: Financial performance

3,000 2,500 2,000 2,021 1,958 2,398 2,403 2,150 1,637 1,500 1,000 500 0 2QCY10 3QCY10 4QCY10 1QCY11 2QCY11 3QCY11 4QCY11 Net Sales Reported PAT OPM (RHS) 359 100 256 351 337 470 168 10 20 15 2,503 30 25 35

(` cr)

Source: Company, Angel Research

February 14, 2012

(%)

ACC | 4QCY2011 Result Update

Exhibit 3: 4QCY2011 Actual vs. Angel estimates

(` cr) Net sales Operating profit OPM (%) Net profit
Source: Company, Angel Research

Actual 2,503 442 17.7 470

Estimates 2,325 402 17.3 219

Variation (%) 7.6 9.8 35bp 114.8

Performance highlights
Robust top-line growth
ACC reported strong top-line performance during 4QCY2011 on account of improved realization and higher cement dispatches. During the quarter, ACCs realization rose by strong 20.3% yoy and 11.3% qoq to `4,206/tonne. Even the companys dispatches rose by 6.3% yoy. Growth in dispatches was on account of capacity additions carried out by the company at Wadi and Chanda.

Higher power and fuel and freight costs impacted OPM

Despite improved yoy realization, the company faced margin pressure during the quarter on account of surge in power and fuel cost and freight cost. Power and fuel cost per tonne rose substantially on account of higher coal prices in the domestic and international market (yoy basis) and impact of rupee depreciation. Freight cost per tonne increased on account of higher petroleum products costs and railway freight charges. Hence, the company reported OPM of 17.7%, almost flat on a yoy basis.

Per tonne analysis

For 4QCY2011, ACCs realization/tonne improved by 20.3% yoy to `4,206. Power and fuel cost/tonne surged by 21.7% yoy to `981. On a qoq basis, power and fuel cost/tonne was flat. Freight cost/tonne increased by 18.3% yoy and 8.1% qoq to `633. Operating profit/tonne stood at `654, up 75.4% yoy.

Exhibit 4: Operational performance

Parameter (`) Realization/tonne Raw-material cost /tonne Power and fuel cost /tonne Freight cost/tonne Other expenses/ tonne Operating profit/tonne
Source: Company, Angel Research

4QCY11 3QCY11 4QCY10 yoy chg (%) qoq chg (%) 4,206 649 981 633 968 654 3,779 700 971 585 918 387 3,496 676 806 535 1013 373 20.3 (4.0) 21.7 18.3 (4.5) 75.4 11.3 (7.3) 1.0 8.1 5.5 68.9

February 14, 2012

ACC | 4QCY2011 Result Update

Investment rationale
Favorable capacity location to augur well for the company
Around 51% of ACC's total capacity is located in states where either cement supply is less than cement demand or, if it is more, excess can economically be supplied to nearby supply-deficit states. Hence, all such capacities can rationally achieve relatively higher capacity utilization. Even its entire south India plant capacity is in Karnataka and TN, where demand-supply dynamics are far better than those in AP.

Growth to be driven by capacity addition

Post the expansion of Wadi plant and the commissioning of the 3mtpa Chanda plant, ACC's total capacity currently stands at 30mtpa. These capacity additions are expected to drive its growth going ahead, as was reflected by the 11.5% yoy increase in its dispatches during CY2011.

Higher fuel availability for CPPs Lower power and fuel costs
Going ahead, we expect power and fuel cost to be lower for the company, as it currently has 85% self sufficiency in power with 361MW of captive power plant (CPP) and access to the highest coal linkage in the industry along with few captive coal blocks.

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 on account of 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.

February 14, 2012

ACC | 4QCY2011 Result Update

Exhibit 5: Key assumptions for CY2012E

Earlier Installed capacity (mtpa) Utilization (%) Power cost/tonne (`) EBITDA/tonne (`)
Source: Company, Angel Research

Revised 30 86 944 782

30 85 935 814

Exhibit 6: Change in estimates for CY2012E

Parameter (` cr) Net sales Op. expenses Op. profit Depreciation Interest PBT Tax PAT
Source: Angel Research

Earlier 10,597 8,516 2,261 492 99 1,879 610 1,269

Revised 10,694 8,670 2,204 496 68 1,839 528 1,311

Var. (%) 0.9 1.8 (2.5) 0.7 (31.3) (2.1) (13.4) 3.3

Exhibit 7: One-year forward EV/tonne

250,000 200,000

EV (` mn)

150,000 100,000 50,000 0

Oct-01

Oct-02

Oct-03

Oct-04

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

EV/tonne

$90

$110

$130

$150

Source: BSE, Company, Angel Research

February 14, 2012

Oct-11

Apr-01

Apr-02

Apr-03

Apr-04

Apr-05

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Apr-11

ACC | 4QCY2011 Result Update

Exhibit 8: Recommendation summary

Company ACC* Ambuja Cements* India Cements JK Lakshmi Cement Madras Cements Shree Cement UltraTech Reco. Neutral Neutral Neutral Buy Neutral Neutral Neutral CMP (`) 1,339 171 95 62 142 2,449 1,404 Tgt. price (`) 79 Upside (%) 27 FY2013E P/BV (x) 3.2 3.3 0.8 0.6 1.4 3.3 2.7 FY2013E P/E (x) 19.2 20.3 9.7 4.5 8.9 20.3 17.0 FY2011-13E EPS CAGR (%) 8.2 2.1 174.0 104.4 34.0 27.6 27.1 FY2013E RoCE (%) 20.0 20.3 7.4 10.5 13.1 15.8 17.5 FY2013E RoE (%) 17.4 16.9 8.5 13.3 17.0 17.7 17.1

Source: Company, Angel Research; Note : * December year ending

February 14, 2012

ACC | 4QCY2011 Result Update

Profit & loss statement (Standalone)

Y/E Dec. (` cr) Total Operating Income % chg Total Expenditure Net Raw Materials Other Mfg costs Personnel Other EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg CY07 7,007 20.7 5,090 903 1,195 353 2,639 1,917 18.1 27.4 305 1,612 17.8 23.0 24 129 6.7 1,717 17.7 (213) 1,930 492 25.5 1,439 14.4 17.5 65 65 14.2 CY08 7,283 3.9 5,550 886 1,599 416 2,648 1,733 (9.6) 23.8 294 1,439 (10.8) 19.8 40 338 18.9 1,737 1.1 (49) 1,785 524 29.3 1,262 (1.0) 16.7 65 65 (1.1) CY09 8,191 12.5 5,547 956 1,540 368 2,684 2,644 52.6 32.9 342 2,302 60.0 28.7 84 77 3.3 2,294 32.1 2,294 688 30.0 1,607 32.5 20.0 85 85 32.4 CY10 7,976 (2.6) 6,163 1,168 1,599 462 2,935 1,812 (31.5) 23.5 393 1,420 (38.3) 18.4 57 98 6.7 1,461 (36.3) 1,461 341 23.4 1,120 (30.3) 14.5 60 60 (30.3) CY11 9,660 21.1 7,740 1,503 2,183 526 3,527 1,921 6.0 20.3 475 1,445 1.8 15.3 97 192 12.5 1,540 5.4 1,540 215 14.0 1,325 18.3 14.0 71 71 18.3 CY12E 10,874 12.6 8,670 1,737 2,441 586 3,906 2,204 14.8 20.6 496 1,709 18.2 16.0 68 198 10.8 1,839 19.4 1,839 528 28.7 1,311 (1.1) 12.3 70 70 (1.1)

February 14, 2012

ACC | 4QCY2011 Result Update

Balance sheet (Standalone)

Y/E Dec. (` cr) SOURCES OF FUNDS Equity Share Capital Reserves & Surplus Shareholders Funds Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Misc. Exp. not written off Total Assets 5,464 2,149 3,315 649 845 2,203 743 421 1,039 2,059 145 4,953 5,836 2,366 3,470 1,603 679 2,760 984 651 1,124 2,766 (6) 5,746 6,826 2,668 4,158 2,156 1,476 2,256 708 554 994 3,114 (858) 6,932 8,077 2,995 5,082 1,563 1,703 2,753 980 624 1,149 3,746 (993) 7,355 9,677 3,470 6,208 435 1,625 3,618 1,653 590 1,375 3,664 (46) 8,221 10,113 3,965 6,147 726 1,603 4,067 1,589 639 1,839 3,640 427 8,903 188 3,965 4,153 469 331 4,953 188 4,740 4,928 482 336 5,746 188 5,828 6,016 567 349 6,932 188 6,282 6,469 524 362 7,355 188 7,004 7,192 511 518 8,221 188 7,711 7,899 486 518 8,903 CY07 CY08 CY09 CY10 CY11 CY12E

February 14, 2012

ACC | 4QCY2011 Result Update

Cash flow statement (Standalone)

Y/E Dec. (` cr) Profit before tax Depreciation Interest expense Change in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations (Inc)/ Decin Fixed Assets (Inc)/ Dec in Investments Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances CY07 1,930 305 24 462 129 514 2,078 (739) (341) 129 (951) 2 (447) 535 24 (1,004) 123 620 743 CY08 1,785 294 40 304 338 564 1,522 (1,325) 166 338 (822) 2 13 434 40 (459) 241 743 984 CY09 342 84 506 77 727 (1,544) (797) 77 (2,264) 85 436 84 (435) (276) 984 708 CY10 CY11E CY12E 1,540 475 97 (274) 192 215 1,431 (473) 78 192 (203) (13) 611 (68) (556) 673 980 1,653 1,839 496 68 (537) 198 528 1,140 (726) 22 198 (506) (25) 604 68 (697) (63) 1,653 1,589 393 57 241 98 395 (657) (227) 98 (786) (43) 500 57 (600) 272 708 980 2,294 1,461

2,423 1,658

February 14, 2012

ACC | 4QCY2011 Result Update

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) 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) (0.3) (0.6) 67.3 (0.2) (0.7) 36.0 (0.2) (0.5) 27.3 (0.3) (1.0) 25.0 (0.3) (1.2) 14.9 (0.3) (1.1) 25.2 1.4 35 13 129 (21) 1.3 38 15 159 (40) 1.3 35 11 193 (57) 1.1 39 9 203 (81) 1.1 38 8 175 (69) 1.1 44 9 154 (48) 34.6 54.5 33.6 26.9 55.4 26.7 36.3 90.8 29.4 19.9 49.8 17.9 18.6 37.9 19.4 20.0 36.0 17.4 23.0 74.5 2.0 33.7 19.8 70.7 2.0 27.3 28.1 70.0 1.8 35.1 17.8 76.6 1.6 21.4 15.0 86.0 1.8 23.6 15.7 71.3 1.9 21.1 65.2 65.2 92.8 25.1 64.6 64.6 19.7 85.5 85.5 19.3 59.6 59.6 80.5 21.6 70.5 70.5 95.8 27.8 382.7 69.8 69.8 96.1 27.5 420.3 20.5 14.4 6.1 1.9 3.4 12.4 4.8 20.7 16.2 5.1 1.5 3.1 13.1 4.0 15.7 12.9 4.2 1.4 2.7 8.2 3.1 22.5 16.6 3.9 1.6 2.8 12.0 3.0 19.0 14.0 3.5 2.1 2.4 11.7 2.7 19.2 13.9 3.2 2.1 2.1 10.1 2.5 CY07 CY08 CY09 CY10 CY11E CY12E

82.8 103.7

221.1 262.3 320.1 344.2

February 14, 2012

10

ACC | 4QCY2011 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

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):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

February 14, 2012

11