ACC Q1 Results: Cement maker ACC shares fell 2 per cent in the early trade on Friday reported a 60 per cent YoY decline in consolidated net profit at Rs 227.35 crore in the June 2022 quarter, due to a rise in fuel costs and related inflationary impacts. ACC posted a profit of Rs 569.45 crore in April-June 2021.
Consolidated revenue climbed 15 per cent to Rs 4,468 crore for the quarter under review, up from Rs 3,885 crore in the year-ago period. On a QoQ basis, the revenue grew marginally by 0.9 per cent from Rs. 4,427 crore in the previous quarter.
What Should Investors Do Now?
Goldman Sachs is ‘neutral’ on ACC on the back of a steep rise in pet coke and imported coal prices, which hit the company’s bottomline. It has a target price of Rs 2,100 on the counter, while the stock settled at Rs 2,156.40 on Thursday.
The brokerage said higher fuel prices impacted the results in the June 2022 quarter. It does not expect Ultratech Cement, Shree Cement and Dalmia to see a similar EBITDA decline on a sequential basis.
Axis Securities said: “While ACC is well-positioned in its key markets with better pricing and volume growth, we foresee input costs to remain elevated and start subsiding from Q4CY22. Its capacity expansion plans are progressing well and it is well-poised to capitalize on the growth momentum in the ensuing period
by tapping its upcoming and expanded capacity in demand accretive Central India region. This will also aid the company in gaining market share which it lost to other larger peers over the years.”
“We value ACC at 11x its CY23E EV/EBITDA, factoring in the higher cost and await margins to improve to arrive at a TP of Rs 2,010/share, implying a downside of 7 per cent from the CMP and hence change its rating from BUY to HOLD,” it said.
Foreign research house Credit Suisse has kept ‘neutral’ rating on the stock and cut the target price to Rs 2,000 from Rs 2,450 per share. The long-term outlook was intact amid near-term energy cost headwinds. The company delivered in-line results with 10.5 percent growth in volumes. The margins were impacted at Rs 526 per tonne on a sharp spike in energy cost. Credit Suisse reducing EBITDA/tonne estimate to Rs 750/tonne in CY22 and improving to Rs 970/1000/tonne in CY23/24.
Motilal Oswal In its report said: “ACC reported weak 2Q result as EBITDA declined 51 per cent YoY to Rs 4.25 billion (v/s estimated Rs 4.29 billion) and OPM contracted 13pp YoY to 9.5 per cent (v/s estimated 9.9 per cent). EBITDA/t dipped 56 per cent YoY to Rs 563. ACC, due to ongoing corporate action (acquisition by Adani group which has to be followed by an open offer), has outperformed BSE Sensex by 6 per cent in CY22; whereas, other companies underperformed the index by 17-38 per cent. We expect ACC’s EBITDA and profits to decline at a CAGR of 4 per cent and 6 per cent over CY21-23, respectively. The stock trades at 12x CY23E EV/EBITDA (in line with its 10-year average one-year forward EV/EBITDA). We value ACC at 12x Mar’24E EV/EBITDA and downgrade it to Neutral with a revised TP of Rs 2,260 (v/s Rs 2,465 earlier).”
Punit Patni, Equity Research Analyst, Swastika Investmart Ltd., said: “ACC Ltd. has witnessed a disappointing quarter due to rising raw material prices, freight & power costs, and operating expenses. The results were in line with the expectations; however, the cost pressure is expected to continue in the next few quarters. Further, the current valuations leave little room for further upside. The cement sector is witnessing robust demand due to the government thrust on infrastructure, rising CAPEX from the public as well as the private sector, and revival of housing demand, but the entry of Adani Group has changed the whole equation for the sector as the majority of the players have announced capacity expansions to maintain their market share, this could lead to a glut of supply and capacity underutilization. Therefore we remain cautious about the sector and have a neutral rating on ACC Ltd.”
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