Company Update : ACC Ltd By Motilal Oswal Financial Services Ltd
Disappointing performance adjusted for one-offs
* Adjusted for one-offs, including: 1) INR6.4b related to a refund of expense concerning excise duty for the period May’05 to Feb ’13 included in other operating income, and 2) reversal of interest provisions of INR5.3b included in other income, ACC posted a dismal set of numbers in 3QFY25. Adjusted for these one-offs, EBITDA declined 48% YoY to INR4.7b (estimated INR5.9b) and EBITDA/t declined 57% YoY to INR435 (est. INR601). Adj. PAT declined 57% YoY to INR2.3b (est. INR3.1b).
* The management expects cement demand to improve in 4QFY25 as construction activities are expected to pick up. In 1HFY25, industry demand is estimated to increase by a mere 1.5-2% YoY and for FY25, demand is likely to grow 4-5% YoY. Volume growth in 3Q was led by higher trade sales and an increase in premium cement volumes (up 11% YoY).
* We have a BUY rating on the stock and will review our assumptions after the concall (ACC+ACEM) at 2 p.m. on 29th January.
Sales volume above estimates; EBITDA/t down 57% YoY
* Adjusted for one-offs, consol. Rev/EBITDA/Adj. PAT stood at INR52.6b/INR4.7b/INR2.3b (up 7 %/down 48%/down 57% YoY) and (up 6%/down 20%/28% vs. our estimate) in 3QFY25. Sales volumes were up 20% YoY at 10.70mt (up 9% vs. our estimate). Realization was down 11% YoY/ 1% QoQ at INR4,915/t (2% below our estimate).
* Opex/t decreased 1% YoY (1% above our estimate), led by a decrease in freight/other expenses of ~5%/16% YoY. Variable cost remained flat QoQ but was up 5% YoY. OPM contracted 9.4pp YoY at ~9% and EBITDA/t declined 57% YoY to INR435.
* Depreciation increased 7% YoY, while interest expense declined 17% YoY. Other income was up 35% YoY. Adj. PAT was down 57% YoY at INR2.3b.
* In 9MFY25, consol. Rev/EBITDA/Adj. PAT stood at INR150.2b/INR15.8b/INR8.2b (up 3%/down 29%/down 40% YoY). Sales volume was up 14% YoY, while realization declined 10% YoY in 9MFY25. EBITDA/t was at INR523 vs INR842 in 9MFY24. Liquid cash balance stands at INR25.26b vs INR29.21b in 2QFY25.
Key takeaways from investors’ press release
* Fuel consumption cost declined 10% YoY to INR1.68/kcal vs INR1.86/kcal in 3QFY24. Fuel consumption in kilns reduced to 723kcal vs 739kcal in 3QFY24.
* Green power consumption increased 5.7pp YoY to 18.7% in 3QFY25. AFR consumption in kiln increased 40bp YoY to 9.6% in 3QFY25. The 200MW solar plant at Khavda has been commissioned, which will contribute to a further increase in the green power share.
Valuation and view
* ACC has delivered strong volume growth in YTDFY25, but its operating performance has been lackluster. Management had guided for cost savings led by cost efficiency measures, but pressure on cement prices has impacted profitability in YTDFY25. Our current estimates indicate an exit EBITDA of INR986 in 4QFY25, which seems to be at risk. Our current estimate for FY26/FY27 EBITDA/t is of INR797/INR915, respectively.
* We have a BUY rating on the stock and will review our assumptions after the concall on 29th Jan’25 at 2:00 pm. (Link).
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