Buy ACC; target of Rs 1815: KRChoksey

KRChoksey's research report on ACC

ACC Ltd.'s revenue in Q3CY20 rose 35.9% QoQ (flat YoY) to INR 3,537 Cr. Steller QoQ growth was supported by volume growth in both the segments of Cement & RMX. Realization were stable YoY as well as QoQ. EBITDA for the quarter was up by 20.5% YoY (up 27.8% QoQ) to INR 671 Cr. EBITDA margin came in at 19.4%, an improvement of 328bps YoY (-148bps QoQ). Expansion in EBITDA margin was led by operational efficiency and cost reduction initiatives. Net Profit rose 20.3% YoY (up 34.3% QoQ) and Net Profit margin for the quarter expanded by 176bps YoY to 10.5% (-26 bps QoQ). Other income for the quarter decreased by 10.4%/11.3% on YoY/QoQ basis, respectively.

Outlook

The shares of ACC has rallied 14.5% since our last earnings update (at INR 1,379/share) and are currently trading at EV/EBITDA multiple of 9.4x/7.2x on CY20/CY21E EBITDA. We maintain our earlier EV/EBITDA multiple of 11.0x on CY21E EBITDA and arrive at a revised Target Price of INR 1,815/share (earlier INR 1,535); an upside potential of 15.0% over CMP. Accordingly, we upgrade our rating to “BUY” on the shares of ACC.

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