Strong Operational Performance : Views on Q1CY21 results of ACC Ltd. by Mr. Kunal Shah, Analyst - Institutional Equities, YES SECURITIES
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Below are views on Q1CY21 results of ACC Ltd. by Mr. Kunal Shah, Analyst - Institutional Equities, YES SECURITIES for your consideration.
ACC Q1CY21 - Strong operational performance!
CMP Rs1,877; 1year TP Rs2,028; Upside 8%; Rating - ADD
Our View:
1) ACC delivered strong set of numbers for Q1CY21 with marginal outperformance on volumes (+21.5% y/y and +2.2% above estimates) and massive outperformance on EBITDA level (+47% y/y) which was 22% above our estimates and 20% above consensus estimates. Better than expected realizations due to higher share of premium products (cement NSR up 6.5% y/y vs est. of +3.5% y/y) and lower clinker cost led to beat on operating performance.
2) Going ahead, on the back of sharp surge in energy prices (spot prices at ~Rs 1.4/kcal on blended basis vs consumption cost of Rs 1.1-1.2/kcal during the quarter), we expect P&F costs to rise by ~Rs 170/te sequentially from Q2CY21E onwards. However, strong pricing scenario and operating leverage would offset the surge in costs to some extent translating into range-bound profitability for CY21E vis-à-vis CY20.
3) We upgrade our volume estimates by 4.8%/2.4% and EBITDA estimates by 12.1%/11.2% for CY21E/CY22E respectively.
4) ACC is speedily ramping up recently commissioned 1.4 MTPA brownfield grinding unit in Jharkhand while company expects to commission Ametha project in Central market by Q2CY22.
5) In the medium term, we expect volume/EBITDA CAGR of 13.5%/11.3% over CY20-CY22E. Balance sheet would continue to remain strong despite capex with net cash of Rs 65.4 bn in CY22E vs ~Rs 60 bn in CY20.
6) At CMP of Rs 1,877, ACC is trading at EV/EBITDA of 9.5x on CY22E. We continue to assign EV/EBITDA multiple of 10x on CY22E and arrive at TP of Rs 2,028/share with potential upside of 8% (previous TP of Rs 1,845). We have an ADD rating on the stock.
Key Risk: Further lockdowns across states due to second wave of COVID would hamper volume growth and timelines of capex commissioning.
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