ACC Q3 Results: Brokerages Retain Ratings, Price Targets Despite Cost Pressures
Brokerages retain rating despite rising cost pressures for ACC.
Most brokerages retained their ratings and price targets on ACC Ltd. even as its costs rose in the quarter ended September.
The cement maker saw energy price inflation during the quarter but managed the impact by reducing the cost of freight. Analysts expect a price hike in the ongoing festive season and see the full impact of energy costs to be felt in the fourth quarter ending March.
ACC's profit slipped 20.9% sequentially to Rs 450.2 crore in the third quarter ended September, a seasonally weak period when construction activity slows because of the monsoon. ACC follows calendar-year reporting.
Shares of ACC were trading 2.95% higher on Wednesday morning compared with a 0.19% rising in the benchmark Sensex.
Here’s what brokerages make out of the pan-India cement maker's Q2 results:
Jefferies
Maintains 'buy' rating with a target price of Rs 2,870 per share.
ACC's third-quarter CY21 Ebitda was in line with estimates despite a miss on volumes and cost which was offset by higher realisations.
The impact of energy price inflation was visible.
ACC did well to manage its freight cost (quarter-on-quarter decline).
Unit Ebitda at >Rs 1,080 per tonne remained at a respectable level.
Retain earning forecasts and 'buy' rating on inexpensive valuation (9.5x one-year EV/Ebitda)
Cement price hikes hold the key, given sharp cost inflation.
CLSA
ACC's third-quarter Ebitda helped by better realisations.
Costs largely in line; Q3 Ebitda per tonne of Rs1,083 (down 15% quarter-on-quarter) was better than estimated.
Focus on capacity expansion and price hike.
Valuations attractive but catalysts back-ended.
ACC is trading at about 24% discount to peers.
ACC is at 10x CY22 EV/Ebitda and with benefits from capacity expansion.
Finds risk-reward attractive.
Macquarie
Retain outperform rating with a target price of Rs 2,591 per share.
Cost inflation should be reflected in fourth quarter earnings.
Domestic coal accounted for ~50% of ACC’s coal requirement (vs 0-20% for the large peers).
Factor the price hike to largely offset the same.
Raise CY22E and CY23E earnings by ~1% led by higher other income vs our earlier estimate.
ACC’s 2.7 million tonne clinker and 4.8 MT grinding expansion is on track.
Nomura
Maintains 'neutral' rating with target price retained at Rs 2,215 per share.
Q3 ahead of expectations on better realisation.
Increase in opex lower than expectations.
Volume lower; blended realizations slightly higher.
Lower increase in operating expenses drives the beat on estimates.
Ebitda decline sequentially on higher costs, but quantum of decline lower than that of Ultratech Cement Ltd.
Demand likely to pick up post-festive season; price hikes remain the key.
Citi
Maintains 'buy' rating on stock; target price retained at Rs 2,800 per share.
Q3 ahead of expectations on better pricing and geographical mix.
Continued focus on cost optimisation.
Q3 volumes up 1% year-on-year, down 4% quarter-on-quarter (slightly below estimates).
Realisations down ~1% quarter-on-quarter (Citi estimates -3%).
Overall cost per tonne up 4% quarter-on-quarter (Rs 150 per tonne).
Existing inventory and efficiency initiatives led to saving on power and fuel cost will be commissioned in CY22E.