Add ACC Ltd For Target Rs. 2,291 - Yes Securities
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Our view and valuation:
* ACC delivered strong set of numbers for Q2CY21 with outperformance on volumes (+43.7% y/y) and massive outperformance on EBITDA level (+65% y/y) which was 23% above our estimates. Better than expected realizations due to higher share of premium products (cement NSR up 2% y/y) and lower clinker cost led to beat on operating performance.
* We have recalibrated our estimates where volumes kept unchanged but rationalized cost structure as we were too aggressive which resulted in absolute EBITDA accretion by 8.3%/9.3% for CY21E/22E respectively. At CMP of Rs2,151, ACC is trading at EV/EBITDA of 10.2x on CY22E. We have assigned EV/EBITDA multiple of 10.5x on CY22E and arrive at TP of Rs 2,291/share with potential upside of 6.5% (previous TP of Rs2028). We have an ADD rating on the stock.
Result Highlights:
* Volume dispatches for Q2CY21 stood at 6.84MT translating into 43.7% y/y growth while was lower by 9.7% y/y to our estimates. RMC volumes came in at 0.58mcm; witnessed sequential drop of 30.1% as construction activity remained muted due to covid‐19 related restriction.
* Cement NSR/te was Rs5153 during the quarter witnessing an improvement of 2% y/y (vs. est. of ‐0.43% y/y). Improvement and outperformance in NSR/te on y/y basis was primarily driven by product mix optimization and higher share of premium products.
* Net sales for the company stood at Rs 38.9 bn – a growth of 49.3% y/y while was 8.2% below our estimates.
* ACC delivered extremely strong outperformance on EBITDA level with absolute EBITDA for the quarter at Rs 8.7 bn (+23% above our estimates) while EBITDA growth stood at 65% y/y. Per ton profitability on blended basis came in at Rs 1,234 (vs. est. of Rs 898) translating into healthy improvement of 13.1% y/y and 18.5% q/q. Better pricing and lower clinker cost led to strong operational performance for the company.
* Net profit for the company stood at Rs5.7bn which grew by 108.1% y/y.
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