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Centrum Broking
ACC (Add)
CMP: ₹1,581.8
Target: ₹1,714
ACC reported a healthy performance in 2QCY19 with about 8 per cent y-o-y revenue growth to ₹4,060 crore backed by strong realisation gains of 8 per cent y-o-y (with flat volumes). Cement revenues added about 7 per cent y-o-y to ₹3,840 crore. Ready-mix concrete (RMC) volume grew by about 11 per cent y-o-y and revenues rose14 per cent y-o-y to about ₹3,660 crore (about ₹320 crore in 2QCY18). EBITDA margins jumped to 18.8 per cent, compared to 16.2 per cent in 2QCY18.
EBITDA/tn rose to ₹960/tn from ₹751/tn in 2QCY18) despite 5 per cent cost inflation contributed by energy and logistic cost. Effectively adjusted PAT increased about 38 per cent to about ₹450 crore from ₹326 crore in 2QCY18.
ACC’s earnings performance in 1HCY19 at ₹1,310 crore (EBITDA) was largely contributed by higher realisation while volume growth was flat. We feel the performance may slacken as realisations taper in the monsoon quarter and volume pressure increases in 4Q.
Our CY19/CY20/CY21 EBITDA estimates are at ₹2,320 crore/2,590 crore/ 2,820 crore. Effectively our CY19/CY20/CY21 EPS estimates are ₹63.5/₹73/₹80 respectively. The performance will be largely driven by realisation gains and higher sale of premium products with limited volume growth. However, this adds to the earnings volatility and risk. Cost inflation is unlikely to taper off which further adds to the concern.
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