ACC share price: ACC shares gained 6 per cent in early trade as the cement company announced its Q1FY23 results. The cement maker reported a 29.6 per cent year-on-year (YoY) drop in consolidated net profit at Rs 396.3 crore for the first quarter ended March 31, 2022. The company, which follows the January-December financial year cycle, posted a net profit of Rs 563 crore in the January-March quarter a year ago. Total revenue for the quarter rose 3.1 per cent YoY to Rs 4,426.5 crore from Rs 4,292 crore in the year-ago quarter.
ACC is a subsidiary of Swiss building material major Holcim Group. At the operating level, EBITDA declined 26.2 percent to Rs 634.6 crore in Q1 FY23 over Rs 860 crore in Q1 FY22. EBITDA margin stood at 14.34 percent in Q1 FY23 as compared to 21.5 percent in Q1 FY22. EBITDA is earnings before interest, tax, depreciation and amortization.
“The January to March 2022 quarter was impacted due to the global rise in fuel costs driven by the overall geopolitical situation,” ACC earning statement quoted its Managing Director and CEO Sridhar Balakrishnan as saying. Its efficiency and cost reduction actions remained strong and helped the company to “partially offset” the impact, the statement said.
Should Investors Buy, Sell or Hold the Stock?
BofAML has kept an underperform rating on the stock with a target of Rs 2,000. The numbers were in line as cost-containment measures partly offset input cost increases. The volume trajectory remains at a marginal year-on-year dip.
The research house Goldman Sachs has a maintained neutral rating on the stock with a target of Rs 2,300. Goldman Sachs expects cost pressures in the second and third quarters of 2022 to keep profitability in check. Major capacity expansions are still 9-12 months away and volume and EBITDA growth will likely lag peers.
Prabhudas Lilladher, in its note said that ACC reported earnings in line with our and consensus estimates (CE). EBITDA declined 26 per cent year on year at Rs 635 crore (PLe: Rs 630 crore, CE: Rs 647 crore) due to 3/24 percent fall in volumes/margins.
ACC has narrowed the gap on margins with peers over the last couple of years on the back of a visible reduction in manufacturing costs and higher operational efficiencies under Parvat programme complemented by rationalisation of logistics costs through a master supply agreement (MSA) with Ambuja Cement. However, the scope for further reduction in costs remains limited as a majority of levers are already captured in current cost dynamics, except for reduction in power costs on account of upcoming WHR plants.
“In spite of slow pace of price hikes and a sharp increase in costs, we continue to like ACC on the back of attractive valuations and upcoming capacity addition of 5 mnt in one of its most profitable and growing region, central region,” the brokerage said. The brokerage maintains a buy with a target price of Rs 2,300 based on EV/EBITDA of 12x 2023E.
Motilal Oswal said that “We expect ACC to benefit from its capacity expansion plans in central India. Benefits from cost-saving strategies (project Parvat and MSA) are expected to continue.”
“The company is well-placed to pursue growth opportunities as it will have net cash of Rs 7,900 crore in 2023 versus Rs 7,440 crore in 2021 despite a growth capex of Rs 3,000 crore over CY22-23E. The management said it will increase capacity to 45-50 million tonne per annum over the next two-to-three years,” it added.
“We value ACC at 11.5x 2023 EV/EBITDA (versus its 10-year average EV/EBITDA of 12x) to arrive at our target price of Rs 2,485. We maintain our buy rating on the stock. In the near term, news flows regarding Holcim’s possible exit from India will keep the stock in focus,” it stated.
Reliance Securities said that “While realizations during the quarter were better both on a QoQ and YoY basis, input cost pressure took a toll on EBITDA margins which contracted by 629 bps YoY (up 96bps QoQ) to 12.2 per cent and 29bps higher than our estimate. Higher input cost continues to remain the major concern for all cement companies and is expected to remain so in CY22/FY23 unless fuel and diesel prices cool off meaningfully. While ACC has been working on improving cost efficiencies through various ways, these are expected to start paying off. The commissioning of new capacities and a further improvement in operating parameters by way of setting up WHRS at various plants should aid it to witness sustainable growth. Currently, we have a BUY recommendation on the stock with a 1-Yr Target Price of Rs2,636.”
Read all the Latest Business News and Breaking News here
Comments
0 comment