ak stockmart - acc - oct 22, 2010

8/7/2019 AK Stockmart - ACC - Oct 22, 2010

1/4

1 22nd Oc tobe r 2010

ACC Ceme nt Ltd. CMP 984

Targe t Price 900

Potential Downside 9%

Strugg le with Poo r volumes & rising c osts

Q3CY10 - Result upd ate

REDUCE Performa nce suffered a setbac k in terms of volume and realisation:

ACC Cement Ltd (ACC) posted a decline of 79.2% in its net profit for

Q3CY10 at Rs 863.1 mn, compared with Rs 4155.1 mn in the previous year

c orrespo nd ing qua rter. Tota l inc om e d uring the p eriod dow n by 14.3% to

Rs 18113.0 mn aga inst Rs 21146.6 mn last yea r.

EBIDTA fo r the qua rter d ec lined by 68.6% to Rs 2172.4 mn, wh ile the EBIDTA

margins dropped by 20.7% to 12.0%. While the net margins declined by

14.8% to 4.8%. EPS fo r the qua rter stoo d a t Rs 4.6.

The d ispa tc hes for the q ua rter stood a t 4.83 mnT, do wn b y 3.6% on YoY

and prod uc tion for the quarter stood at 4.63 mnT, do wn b y 8.3% on YoY.

The rea lisa tion fo r the qua rter stoo d at Rs 3642 per to nne, d ec lined

significantly 12.2% on YoY and 11.3% on Qo Q basis.

The d rop in revenues wa s ma inly on a c c ount d rop in rea lizat ion and

dispa tc hes hit the co mp any s pe rformanc e. The net p rofit d rop pe dsignificantly due to lower operating performance and increase in

dep recia tion, interest c ost. The inc rea sed raw m a terial co sts, pow er, fuel

c ost and othe r op erating e xpenses resulted in lower op erating p rofit.

The volume of clinker produc tion and a lso c eme nt ca me d ow n due toshutdown at Wadi II for hook-up and commissioning for most period ofthe q uarter. Market c ond itions were w ea k in off ta kes and pric es due toseve re mo nsoon and flood s. The c ost of p rod uc tion wa s also impac teddue to hike in input c osts for slag , fly ash and pow er.

Expa nsion projec ts on trac t; new c ap ac ity to boost volume s: The m ajorexpansion projec t at Cha nda in Maha rashtra, which will ad d c ap ac ity of3 mnT of c em ent tog ethe r with a 25 MW pow er plant, is nea ringc omp letion; we expec t this will ad d to volume g rowth in CY11E.

Outlook and valuations: Significa nt new ce ment c ap ac ity has be enadded in the industry in last six months, particularly in southern regionwhich, coupled with the monsoons, caused stress in the market,especially in prices. However the prices have started increasing fromSep tem be r 2010 onw ards, we expec t the industry will cont inue totraverse a positive trend in terms of overall growth in the foreseeablefuture. On demand side we are bullish and expect industry to report 11-12% growth in FY11E. Even we anticipate the prices to improve furtherfrom current levels. But ACCs newly commissioned capacities have notbeen ramped up which failed to give volume growth and expect thecompany to report subdued growth in dispatches for current year, thismay not lead to outperform the industry. At CMP of Rs 984, stock tradesat va lua tion of USD 136 and USD 125 EV/ Tonne fo r CY11E and CY12E

respectively. We have valued the stock based on DCF valuationmethodology, due to poor performance we revised our earningsestimate and we recommend REDUCE with a price target of Rs.900,do wnside of 9% from the c urrent levels.

BSE 500410

NSE ACC

Reuters ACC.BO

Bloom be rg ACC IN

Industry Cement

Market Cap (Rs. Mn) 184970

Equity (Rs. Mn) 1879.4

Fac e Va lue (Rs.) 10

52WkH/ L 1049/ 700

Sensex 20166

Nifty 6066

Sharehold ing Pattern as on 30thSeptember 2010

46%

1%15%

15%

15%

8%

Promoter Mutual Funds

FIIs Public

Financial Inst./Banks Non Institutions

Sensex v/ s ACC Cem ent Ltd

0.75

1.00

1.25

1.50

1.75

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

ACC Sensex

(INR

million)

Net

Revenue

YoY

(%)EBITDA

YoY

(%)

Ad j

PAT

YoY

(%)EPS

ROE

(%)

RoCE

(%)

P/ E

(x)

EV/ EBITDA

(x)

EV/ Tonne

(USD)

CY2010E 81,903.5 -3.4% 19,602.0 -20.5% 11,017.9 -29.5% 58.6 16.7% 49.4% 16.8 9.6 161

CY2011E 90,868.3 10.9% 20,840.0 6.3% 11,776.0 6.9% 62.7 15.8% 44.9% 15.7 8.8 136

CY2012E 103,066.9 13.4% 23,651.8 13.5% 13,869.8 17.8% 73.8 16.4% 42.0% 13.3 7.1 125

Source: A.K.Stoc kma rt Institutiona l Researc h

A. K. Stoc kmart Pvt. Ltd.


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2 22nd October 2010

Financ ial Details: Consolidated:Rs in mn

Particulars3rd Qtr

200909

4th Qtr

200912

1st Qtr

201003

2nd Qtr

201006

3rd Q tr

201009

Net Sales 20773.8 19214.6 22,403.8 21668.9 17591.8

Oth er Op erat ing Inco me 367.1 624.2 348.8 423.1 523.9

Sha re of Earnings of Assoc iates 5.6 0.0 9.9 5.9 -2.7

Tota l Inc om e 21,146.6 19,838.8 22,762.4 22,097.9 18,113.0

% YoY c ha ng e 10.5% -5.0% 3.9% -0.8% -14.3%

% QoQ c ha ng e -5.0% -6.2% 14.7% -2.9% -18.0%

TOTAL EXPENDITURE 14232.4 14907.9 16210.2 16158.6 15940.5

PBIDT 6914.2 4930.9 6552.2 5939.3 2172.4

PBIDT % 32.7% 24.9% 28.8% 26.9% 12.0%

PBIDT per tonne 1380.1 942.8 1174.2 1124.9 449.8

% YoY c ha ng e 63.5% 1.1% -2.6% -22.4% -68.6%

% QoQ c ha ng e -9.7% -28.7% 32.9% -9.4% -63.4%

Inte rest 135.5 180.6 136.3 141.6 164.2

PBDT 6778.7 4750.3 6415.9 5797.7 2008.2

Dep rec iat ion 876.5 1051.9 1,030.7 1046.8 1002.4

Othe r Incom e 150.3 200.4 260.5 181.0 294.3

Mino rity Inte rest -0.9 0.0 0.2 -0.02 -0.4

PBT 6053.4 3898.8 5645.5 4931.9 1300.5

Tax 1898.3 1091.7 1,716.7 1437.2 437.4

Rep orte d Profit Aft er Tax 4155.1 2807.1 3928.8 3494.7 863.1

Extra-o rdina ry Item s 0.0 0.0 0.0 0.0 0.0

Ad justed Profit After Extra-

ordinary item 4155.1 2807.1 3928.8 3494.7 863.1

Net marg ins 19.6% 14.1% 17.3% 15.8% 4.8%

% YoY c ha ng e 59.8% 7.9% -1.6% -25.8% -79.2%

% QoQ c ha ng e -11.8% -32.4% 40.0% -11.0% -75.3%

EPS 22.14 14.9 20.9 18.6 4.6

% YoY c ha ng e 59.9% 7.5% -1.8% -25.9% -79.3%

% QoQ c ha ng e -11.8% -32.5% 40.0% -11.0% -75.3%

Source: A.K.Stoc kma rt Institutiona l Research


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3 22nd October 2010

P&L ac count: Old estima tes:(Rs in mn)

Partic ula r CY09 CY10E CY11E CY12E

Tota l Inc om e 84827.1 89987.4 96465.6 104224.9

% YoY cha nge 10.2% 6.1% 7.2% 8.0%

Tota l Expend iture 60172.9 65096.1 70671.5 76342.4

EBIDTA 24654.2 24891.2 25794.2 27882.5

EBIDTA % 29.1% 27.7% 26.7% 26.8%

% YoY cha nge 48.1% 1.0% 3.6% 8.1%

Ad justed Net Profit 15639.0 14777.4 15276.8 16790.8

PAT % 18.4% 16.4% 15.8% 16.1%

% YoY cha nge 42.2% -5.5% 3.4% 9.9%

EPS 83.2 78.6 81.3 89.3

Revised estima tes:

(Rs in mn)Partic ula r CY09 CY10E CY11E CY12E

Tota l Inc om e 84827.1 81903.5 90868.3 103066.9

% YoY cha nge 10.2% -3.4% 10.9% 13.4%

Tota l Expend iture 60172.9 62301.5 70028.3 79415.0

EBIDTA 24654.2 19602.0 20840.0 23651.8

EBIDTA % 29.1% 23.9% 22.9% 22.9%

% YoY cha nge 48.1% -20.5% 6.3% 13.5%

Ad justed Net Profit 15639.0 11017.9 11776.0 13869.8

PAT % 18.4% 13.5% 13.0% 13.5%

% YoY cha nge 42.2% -29.5% 6.9% 17.8%

EPS 83.2 58.6 62.7 73.8

Source: A.K.Sto ckma rt Institutio na l Resea rch

Basanth Patil

Researc h Ana lyst

Ema il:- b asanth.pa til@akg roup.c o.in

Tel:- 91-22 67544781


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4 22nd October 2010

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ak stockmart - acc - oct 22, 2010

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