Add ACC Ltd For Target Rs.2,420 - Yes Securities
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Efficiency and growth focused; While input cost still a headwind
Result Highlights
Despite the challenging quarter, ACC delivered strong volume of 7.5MT up by 14% q/q (-3% y/y) v/s YSEC est. of 7MT in 4QCY21.
Whereas, NSR softened slightly by 1% q/q, but remain up by 5% y/y to Rs5,456/te took the report revenue to Rs42.3bn (+13% q/q and +2% y/y) in 4QCY21.
On Full Year CY21, Total volume stood at 29.9MT up 13% y/y v/s YSEC est. of 31.7MT, the COVID restriction and extended unseasonal rains have impacted the volume in CY21. Healthy NSR up by 3% y/y took the reported revenue to Rs161bn up by 17% y/y in CY21
However, the inflated total operating cost of Rs4,738/te up by 6% q/q and 10% y/y had plunge the EBITDA by 22% q/q and 21% y/y to Rs5.5bn v/s YSEC est. of Rs7.5bn in 4QCY21.
Despite the Q4 decline, the full year EBITDA grow up by 19% y/y to Rs30bn (inline with YSEC est.) was majorly due to the higher volume over lower base.
The substantial increase in RM/Power cost/te by 40/5% q/q and 19/29% y/y had impacted the EBITDA/te to Rs718, de-grew by 32% q/q and 19% y/y in 4QCY21.
On Full CY21, the power/freight cost up by 15% each to Rs1126/te and Rs1280/te respectively, led the total operating cost by 3% y/y in CY21. Despite that, the EBITDA/te stood at Rs1004 up by 6% y/y aided by lower RM cost/te by 16% y/y and healthy NSR (+3%) in CY21
Our view
Historically, ACC had a sluggish capacity addition as compare to its peers. It resulted in a higher capacity utilization rate (+90%) that had restricted ACC from taking incremental benefit of robust demand and led to a stagnant volume growth over CY10- 20. Thus, to uphold its deteriorating market/capacity share, ACC had lined up capacity addition that would provide production headroom to grow its volume from CY22E onwards. Additionally, ACC also eyeing to improve its operating efficiency through augmenting WHRS capacity and cost improvement programs of MSA with Ambuja, which is already yielding some results. Over a weak base and the upcoming capacity, we expect ACC volume to rebound strongly by 14/9% y/y in CY22E/23E. At CMP, stock is trading at 10/9x of EV/EBITDA on CY22/23E. Thus, we maintain our recommendation to ADD with a TP of Rs2,420 (Rs2291 at 10.5x EV/EBITDA CY22E), valuing the stock at 9.5x EV/EBITDA on the CY23E estimate.
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