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ACC
Performance Highlights
Y/E Dec. (` cr) Net sales Operating profit OPM (%) Rep Net profit
Source: Company, Angel Research
NEUTRAL
CMP Target Price
1QCY2011
2,398 580 24.2 351
`1,247 Cement 23,405 0.7 1422/917 35,355 10 17,504 5,332 ACC.BO ACC@IN
1QCY2012
2,860 645 22.5 155
% chg yoy
19.3 11.3 (162)bp (55.7)
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
ACCs 1QCY2012 net profit fell by 55.7% yoy `335cr one-time depreciation charge due to providing depreciation on captive power plants down value method with retrospective effect.
The companys operational performance was in-line with our estimates. ACC reported 19.3% yoy growth in
its net sales to `2,860cr, on account of 9.1% growth in cement volumes coupled with 9.3% growth in realizations. However, OPM declined by 162bp yoy to 22.5% primarily on account of increased coal and freight costs. At
current levels, we maintain our Neutral view on the stock. OPM down 162bp yoy at 22.5%, impacted by cost pressures: Although ACCs realizations rose by 9.3% yoy (1.2% qoq) during 1QCY2012, the company posted a 162bp yoy decline in its OPM to 22.5%. The company, which predominantly uses domestic coal, witnessed a steep 29.6% yoy increase in its per tonne power and fuel costs (on a low base) due to the substantial 30% price hike carried out by Coal India in March 2011. Per tonne freight costs also rose by 13.6% yoy due to higher diesel prices and freight hike carried out by railways during the quarter. Outlook and valuation: We expect ACC to register 14.8% yoy growth in its top line over CY2011-13E, aided by higher volume and realization. The bottom line is expected to post a CAGR of 7.3%. At current levels, the stock is trading at EV/tonne of US$128 on CY2012E capacity (US$121 on CY2013E 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 11.8 18.7 19.2
3m 6.4 10.5
1yr (10.1)
3yr 59.4
12.6 103.0
CY2010
7,717 (3.9) 1,120 (30.3) 23.5 59.6 20.9 3.6 17.9 19.9 2.6 153 27 11.1
CY2011
9,439 22.3 1,325 18.3 20.3 70.5 17.7 3.3 19.4 18.6 2.2 131 30 10.8
CY2012E
10,796 14.4 1,328 (25.1) 19.9 70.7 17.6 3.1 18.0 19.2 1.9 128 30 9.5
CY2013E
12,441 15.2 1,526 53.7 21.2 81.2 15.4 2.8 19.0 23.3 1.6 121 30 7.3 Sourabh Taparia 022-39357800 Ext 6872 Sourabh.taparia@angelbroking.com
V Srinivasan
022-39357800 Ext 6831 v.srinivasan@angelbroking.com
(` cr)
100
256
3QCY10 4QCY10 1QCY11 2QCY11 3QCY11 4QCY11 1QCY12 Reported PAT OPM (RHS)
(%)
2,000
Performance highlights
Robust top-line growth
ACC reported strong top-line performance during 1QCY2012 on account of improved realization and higher sales volume. During the quarter, ACCs realization rose strongly by 9.3% yoy and 1.2% qoq to `4,256/tonne. The companys cement sales volume rose by 9.1% yoy, aided by capacity additions carried out by the company at Wadi and Chanda and healthy pick-up in demand across the country.
1QCY12 4QCY11 1QCY11 yoy chg (%) qoq chg (%) 4,256 642 1,006 635 825 917 4,206 649 981 633 968 654 3,893 679 777 559 807 900 9.3 (5.5) 29.6 13.6 2.3 1.9 1.2 (1.1) 2.6 0.4 (14.7) 40.1
Investment rationale
Favorable capacity location to augur well for ACC
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 higher capacity utilization. Even its entire south India plant capacity is in Karnataka and Tamil Nadu, where demand-supply dynamics are far better than that in Andhra Pradesh.
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 its power requirement with a 361MW captive power plant (CPP) and access to the highest coal linkage in the industry along with few captive coal blocks.
Revised estimates CY12E 30 969 720 853 CY13E 30 969 720 856 30
CY12E Earlier
10,796 8,872 2,145 488 92 1,805 505 1,299
Revised
10,796 8,872 2,145 529 92 1,379 386 993
Earlier
12,441 10,031 2,632 521 86 2,323 697 1,626
Revised
12,441 10,020 2,643 543 86 2,180 654 1,526
Var. (%)
(0.1) 0.4 4.3 (6.2) (6.2) (6.2)
EV (` mn)
Oct-01
Oct-02
Oct-03
Oct-04
Oct-05
Oct-06
Oct-07
Oct-08
Oct-09
Oct-10
Oct-11
Apr-01
Apr-02
Apr-03
Apr-04
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
EV/tonne
$100
$120
$140
$160
Apr-12
1,439 2,302 1,420 1,445 60.0 (38.3) 28.7 84 77 3.3 18.4 57 98 6.7
1,737 2,294 1,461 1,540 32.1 (36.3) 688 30.0 341 23.4
1,213 1,607 1,120 1,325 32.5 (30.3) 20.0 85.5 85.5 14.5 59.6 59.6
32.4 (30.3)
1,825 1,563
(965) (1,287)
(904) (1,221)
980 1,653
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) (0.2) (0.7) 36.0 (0.2) (0.5) 27.3 (0.3) (1.0) 25.0 (0.3) (1.2) 14.9 (0.3) (0.9) 17.5 (0.2) (0.7) 24.3 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 9 156 (51) 1.3 49.5 9.2 146.4 (38.0) 26.9 55.4 26.7 36.3 90.8 29.4 19.9 49.8 17.9 18.6 37.9 19.4 19.2 35.7 18.0 23.3 46.9 19.0 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 23.8 14.7 72.0 1.9 20.2 16.6 70.0 1.9 22.4 64.6 64.6 82.8 20.0 262.3 85.5 85.5 103.7 23.0 320.1 59.6 59.6 80.5 30.5 344.2 70.5 70.5 95.8 28.0 382.7 70.7 70.7 81.0 26.6 404.6 81.2 81.2 110.1 32.2 448.5 19.3 15.1 4.8 1.6 2.9 12.1 3.7 14.6 12.0 3.9 1.8 2.5 7.6 2.9 20.9 15.5 3.6 2.4 2.6 11.1 2.7 17.7 13.0 3.3 2.2 2.2 10.8 2.5 17.6 15.4 3.1 2.1 1.9 9.5 2.4 15.4 11.3 2.8 2.6 1.6 7.3 2.1 CY08 CY09 CY10 CY11 CY12E CY13E
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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):
10