Buy ACC Ltd For Target Rs.2,400 - Yes Securities
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NSR rescued margin; input cost still a headwind
Result Synopsis
ACC Ltd (ACC) reported resilient result sequentially with volume growth of +3% and NSR up by +1% translates in revenue growth of 5%. As total cost remained flat sequentially, EBITDA margin improved to 14.3% (+117 bps) v/s YSEC 13.3% in Q1CY22.
ACC’s higher capacity utilization rate (+90%) due to slower capacity addition than industry resulted in stagnant volumes and market/capacity share loss. Recently, ACC lined up capacity addition that would provide production headroom to grow its volume from CY22E onwards. Therefore, we expect a volume growth of 8% in both CY22/23E. Due to the elevated fuel & diesel price, we have lowered our EBITDA/PAT estimate by 19/26% for CY22E while kept unchanged for CY23E envisaging cost normalization. Additionally, ACC also eyeing to improve its operating efficiency by scaling up WHRS capacity to 75 MW. At CMP, stock is trading at 11/8x of EV/EBITDA on CY22/23E. Due to recent steep correction and TP of Rs2,400 at 10x EV/EBITDA on the CY23E estimate, we recommend ‘BUY’ (earlier ADD).
Result Highlights
ACC reported a volume of 7.7MT (+3% q/q and -3% y/y; 8.3MT YSEC est.) with healthy NSR of Rs5523/te (+1% q/q and +6% y/y; in-line with YSEC est.) took the report revenue to Rs44.26bn (+5% q/q and +3% y/y; Rs47.72bn YSEC est.) missed due to lower-than-expected volume in Q1CY22.
Rise in power & fuel cost (+33% y/y) and other input cost (+24% y/y) inflated the total operating cost/te by 14% y/y in Q1CY22
Surged in total operating cost by 14% y/y declined EBITDA/te by 24% y/y to Rs792 v/s YSEC est. of Rs735 in Q1CY21. However, healthy NSR (+1% q/q) against flat total operating cost sequentially, improved the EBITDA/te by 10% q/q in Q1CY22.
ACC reported EBITDA of Rs6.35bn (+14% q/q and -26% y/y) in-line with YSEC est. while EBITDA margin stood at 14.3% (+117bps q/q) but decline by 571 bps y/y in Q1CY22.
PAT decline by 30% y/y but remain up by +41% q/q to Rs3.96bn (v/s YSEC Rs3.66bn) in Q1CY22.
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