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Performance missed on all front

Result Synopsis

ACC Ltd (ACC) reported weak operational performance as EBITDA margin declined to 0.4% v/s YSEC est. of 8.6% due to inflating total cost/te by +25% y/y and +8% q/q in Q3CY22. On account of ongoing monsoon, ACC volume & NSR corrected by 9.4% & 1.5% sequentially, while increased by 4.5% & 1.8% y/y owing to the newly added capacities resulted in revenue growth of 6% y/y to Rs39.9bn (v/s YSEC est. Rs41.8) in Q3CY22. ACC reported multi-quarter low EBITDA of Rs164mn declined by 98% y/y and 96% q/q translates in EBITDA/te of Rs23 in Q3CY22. The 9MCY22 operating cost/te increased by +20% y/y mainly due to unprecedented surge in power cost/te by +46% y/y to Rs1597 which declined the EBITDA/te by 58% y/y to Rs469. However, we expect full year EBITDA/te for CY22E to stand at Rs522 (earlier Rs678), owing to normalizing cost and higher NSR that will revive operating profits for Q4CY22E. ACC reported a net loss of Rs873mn declined by 1.2x y/y and 1.4x q/q in Q3CY22. Given the Q3CY22 operational performance, we have trimmed our EBITDA & PAT estimates for CY22E by 26/30% y/y respectively. However, we didn’t change our earnings estimates for CY23E envisaging 1) Cost normalization 2) Improving operating efficiency 3) Incremental volumes. ACC is scaling up its green-power share (WHRS/Solar/ Wind capacity to 75/82/19MW) and alternative fuel usage coupled with debottlenecking of various plants that will aid ACC to improve EBITDA/te to Rs996 for CY23E. ACC recently commissioned Tikaria 1.6 MTPA GU, while other ongoing expansion of Ametha 2.7MTPA Clinker & 1MTPA Cement capacity and Salai Banwa 2.2MTPA are on track which would take total capacity to ~39MTPA by H1CY23E. Therefore, the recently added & upcoming capacity in the central market will improve the volume growth by +12% for CY23E. We recommend NEUTRAL rating with TP of Rs2,364 at 10x EV/EBITDA on CY23E.

Result Highlights

* Ongoing monsoon softened volume & NSR by 9.4% & 1.5% sequentially, while increased by 4.5% & 1.8% y/y over newly added capacities resulting in revenue growth of 6% y/y (-11% q/q) to Rs39.9bn (v/s YSEC est. Rs41.8) in Q3CY22.

* RMC volume grew by 10% y/y (-10% q/q) to 0.75m3 in Q3CY22.

* ACC reported +11% higher than expected total cost/te (+25% y/y and +8% q/q) mainly due to exceptional jump in RM/power & other cost/te by 12/11% & 13% q/q (30/60% & 7% y/y) in Q3CY22.

* ACC reported multi-quarter low EBITDA of Rs0.16bn declined by 98% y/y and 96% q/q translates in EBITDA/te of Rs23 in Q3CY22.

* ACC reported net loss of Rs0.87bn declined by 1.2x y/y and 1.4x q/q in Q3CY22.

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