Accumulate ACC; target of Rs 1650: Prabhudas Lilladher

Prabhudas Lilladher's research report on ACC

ACC posted Q3CY19 EBITDA below our estimates by 4% due to weaker than expected realisations but ahead of consensus estimates by 7%. Weak realisations were partially offset by lower RM and S,G&A costs. Demand remained sluggish across the regions due to prolonged monsoon, weak sentiments and lower govt spending. We expect revival in demand in H2FY19 though at a very slow pace on the back of measures undertaken by govt to release contractor dues, increase infra spending and improve liquidity. Nevertheless, All-India demand growth would stuck in the range of 2-3% for FY20E. Weak demand recovery would increasingly put pressure on prices in H2FY19 given the peak period of activity and intense competitive intensity.

Outlook

We cut our EBITDA estimates for CY19e/CY20e by 7%/9% to factor in lower realisations. Given the low upside potential, we downgrade the stock to Accumulate with TP of Rs1,650 (earlier Rs1,790), EV/EBITDA of 11x CY20e.

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