Buy ACC Ltd For Target Rs. 1,985 - HDFC Securities
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Profits surge on healthy pricing
During 4QCY20, strong pricing in south and stable opex drove ACC’s consolidated revenue/EBITDA/APAT by 2/30/65% YoY to INR 41.4/7.0/4.5 bn respectively. ACC commissioned its 1.4mn MT Sindri grinding unit in Jan’21 and expects to commission the greenfield plants (4.8mn MT) in central region by mid-2022, thus boosting its volume growth outlook. We maintain BUY rating on the stock with a revised TP of INR 1,985/share (10x Dec’22 Consolidated EBITDA).
* 4QCY20 key highlights: Cement volumes fell 1% YoY constrained by capacity ex-south. NSR remained 5% higher YoY despite a 4% QoQ fall (mainly in east and south markets). Unitary opex (adjusted for one-off) rose 1% QoQ (stable YoY) on higher slag and fuel prices. Thus, unitary EBITDA rose 40% YoY to INR 844/MT. RMC division’s sales volume/revenue/ EBITDA fell 22/21/32% YoY to 0.73 cbm/INR 3.1bn/INR 0.5bn respectively on lower demand in the infrastructure segment.
* Outlook: During CY20, ACC generated OCF of INR 22.2bn (flat YoY) and spent INR 7.5bn in capex (vs INR 4.9bn YoY). It has accelerated capex spent 4QCY20 towards its ongoing expansions. In Jan’21, ACC commissioned 1.4mn MT SGU in Sindri (Jharkhand). It expects to commission its greenfield plants in central market (4.8mn MT) by mid-2021. This should boost its volume growth outlook CY22 onwards. We have marginally increased CY21/22E EBITDA estimates by 1/6% respectively. We maintain BUY rating on the stock with a revised TP of INR 1,985/share (10x Dec’22 Consolidated EBITDA).
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