HDFC Securities is bullish on ACC has recommended buy rating on the stock with a target price of Rs 1900 in its research report dated April 24, 2019.
HDFC Securities' research report on ACC
During 1QCY19, consolidated net sales/EBITDA rose 8% YoY each. However, adj. PAT declined 1% YoY, on account of higher tax outgo. Cement sales volume rose 6% YoY (flat QoQ) driving up utilization to 94% vs 89% YoY (and flat QoQ), broadly in-line with our expectations. ACC delivered double digit volume growth in the East markets. Cement NSR in Q1 disappointed as it stood flat QoQ (+1% YoY), despite price recovery QoQ in South, Maharashtra and Central markets. We reckon the negative impact of the same on CY19 profitability can get offset as cement prices have firmed up in all markets in April and are sustaining. Unitary opex moderated 0.4% QoQ (up 1% YoY). ACC’s input costs fell 2% QoQ (benefits of falling petcoke prices), and fixed costs also reduced 2% (on better cost control). However, despite falling diesel prices, freight cost surged 4% QoQ, thus reducing the cost benefits. In our view, margins will benefits from falling petcoke and diesel prices. Share of traded goods purchase is rising (1.7% in Q1CY19 vs 0/1% YoY/QoQ) which is being driven under Master Supply Arrangement (MSA) with Ambuja.
Outlook
We recommend BUY on ACC with TP of Rs 1,900 (11x its Mar-21E consolidated EBITDA and 0.5x its CY20E CWIP).
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Read More
