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A CC Performance Highlights Quarterly results (Standalone) 1QCY2013 Result Update | Cemen t May 7, 2013
A CC Performance Highlights Quarterly results (Standalone) 1QCY2013 Result Update | Cemen t May 7, 2013

ACC

Performance Highlights

Quarterly results (Standalone)

1QCY2013 Result Update | Cement

May 7, 2013

ACCUMULATE

CMP

`1,225

Target Price

`1,361

Investment Period

12 Months

Y/E Dec. (` cr)

1QCY2013

4QCY2012

% chg qoq

1QCY2012

% chg yoy

Net sales

2,956

3,099

(4.6)

2,860

3.4

Operating profit

492

398

23.6

645

(23.7)

OPM (%)

16.6

12.8

380bp

22.5

(591)bp

Reported Net profit

438

239

83.0

491

(10.8)

Source: Company, Angel Research

During 1QCY2013, ACC posted a weak performance on the operational front with a 4.5% yoy de-growth in grey cement volumes and a 2% yoy improvement on the realization front. EBITDA fell by 23.7% on a yoy basis, with EBITDA/tonne at `766 down by 20.2% on yoy basis.

OPM at 16.6%, down 591bp on a yoy basis: ACC’s top-line rose by 2.3% yoy to `2,956cr. The company’s grey cement division posted a 2.4% yoy decline in top-line as volumes fell by 4.5% yoy and realizations improved only by 2% on a yoy basis. Thus, the yoy growth in topline was on account of the merger of RMC business with the company’s standalone operations. OPM at 16.6% was down by 591bp on yoy basis impacted by higher costs. The company wrote back `141cr of income tax provision pertaining to previous year which reduced its tax expense. Thus PAT came in higher than estimates at `438cr, although EBITDA was below estimates at `492cr.

Outlook and valuation: We expect ACC to register a 8.2% yoy growth in its top-line over CY2012-14. The bottom-line is expected to post a CAGR of 10.6% over the same period. At current levels, the stock is trading at an EV/tonne of US$105 on CY2014E capacity. We maintain an Accumulate on the stock with a Target Price of `1,361.

Key financials (Standalone)

Stock Info

Sector

Cement

Market Cap (` cr)

23,004

Net Debt (` cr)

(2,148)

Beta

0.8

52 Week High / Low

1515/1105

Avg. Daily Volume

23,734

Face Value (`)

10

BSE Sensex

19,889

Nifty

6,044

ACC.BO
 

ACC.BO

Reuters Code Bloomberg Code

ACC@IN

 

Shareholding Pattern (%)

 

Promoters

 

50.3

MF / Banks / Indian Fls

10.5

FII / NRIs / OCBs

20.4

Indian Public / Others

18.9

 

Abs. (%)

3m

1yr

3yr

Sensex

0.7

18.2

18.6

ACC

(5.8)

1.6

41.8

Y/E Dec. (` cr)

CY2011

CY2012

CY2013E

CY2014E

Net sales

9,439

11,129

11,751

13,026

% chg

22.3

17.9

5.6

10.9

Adj. Net profit

1,304

1,404

1,449

1,718

% chg

16.4

7.7

3.2

18.6

OPM (%)

20.1

19.8

19.7

21.3

FDEPS (`)

69.4

74.7

77.1

91.4

P/E (x)

17.7

16.4

15.9

13.4

P/BV (x)

3.2

3.1

2.8

2.5

RoE (%)

19.1

19.3

18.6

20.0

RoCE (%)

17.7

19.0

19.5

22.7

EV/Sales (x)

2.2

1.8

1.7

1.4

EV/tonne (US$)*

129

115

111

105

Installed capacity (mtpa)

30

30

30

30

EV/EBITDA (x)

10.7

9.2

8.4

6.7

Source: Company, Angel Research ;Note: *adjusted for CPP

V Srinivasan

022-39357800 Ext 6831 v.srinivasan@angelbroking.com

ACC | 1QCY2013 Result Update Exhibit 1: 1QCY2013 performance (Standalone)

ACC | 1QCY2013 Result Update
ACC | 1QCY2013 Result Update

Exhibit 1: 1QCY2013 performance (Standalone)

(%)

Y/E Dec. (` cr)

1QCY13

4QCY12

% chg qoq

1QCY12

% chg yoy

CY12

CY11

% chg yoy

Net Revenues

2,956

3,099

(4.6)

2,860

3.4

11,130

9,430

18.0

Other Operating Income

-

81

(100.0)

29

(100.0)

228

231

(1.4)

Total Operating Income

2,956

3,180

(7.0)

2,889

2.3

11,358

9,660

17.6

Net Raw-Material Cost

434

794

(45.3)

382

13.6

1,784

1,216

46.8

(% of Sales)

14.7

25.6

13.4

16.0

12.9

Power & Fuel

650

535

21.3

676

(4.0)

2,382

2,183

9.1

(% of Sales)

22.0

17.3

23.6

21.4

23.2

Staff Costs

161

208

(22.5)

132

22.2

617

533

15.7

(% of Sales)

5.5

6.7

4.6

5.5

5.7

Freight & Forwarding

617

606

1.8

574

7.3

2,233

1,894

17.9

(% of Sales)

20.9

19.5

20.1

20.1

20.1

Other Expenses

602

638

(5.6)

479

25.8

2,146

1,913

12.2

(% of Sales)

20.4

20.6

16.7

19.3

20.3

Total Expenditure

2,464

2,782

(11.4)

2,244

9.8

9,162

7,740

18.4

Operating Profit

492

398

23.6

645

(23.7)

2,196

1,921

14.3

OPM (%)

16.6

12.8

380bp

22.5

(591)bp

19.7

20.4

(64)bp

Interest

11

27

(60)

32

(65.8)

115

97

18.3

Depreciation

138

158

(12.2)

131

5.9

559

475

17.6

Other Income

103

66

55.2

66

55.5

265

192

38.0

PBT (ecl. Extr. items)

445

279

59.5

549

(18.9)

1,787

1,540

16.0

Extr. Income/(Expense)

-

-

-

(335.3)

-

PBT (incl. Extr. Items)

445

279

59.5

549

(18.9)

1,452

1,540

(5.8)

Provision for Taxation

8

40

(81.2)

58

(87.0)

390

215

81.4

(% of PBT)

1.7

14.3

10.6

26.9

14.0

Reported PAT

438

239

83.0

491

(10.8)

1,061

1,325

(19.9)

PATM (%)

14.8

7.7

709bp

17.2

(235)bp

9.5

14.1

(452)bp

Source: Company, Angel Research

Exhibit 2: Financial performance

3,500 26 3,099 2,956 24 3,000 2,860 2,778 2,503 2,445 22 2,500 2,150 20 2,000 18
3,500
26
3,099
2,956
24
3,000
2,860
2,778
2,503
2,445
22
2,500
2,150
20
2,000
18
1,500
16
1,000
14
438
470
500
249
239
12
168
155 418
0
10
3QCY11
4QCY11
1QCY12
2QCY12
3QCY12
4QCY12
1QCY13
Net Sales
Reported PAT
OPM (RHS)
(` cr)

Source: Company, Angel Research

ACC | 1QCY2013 Result Update Exhibit 3: 1QCY2013 – Actual vs Angel estimates ( ` cr)

ACC | 1QCY2013 Result Update

Exhibit 3: 1QCY2013 – Actual vs Angel estimates

(` cr)

Actual

Estimates

Variation (%)

Net sales 2,956 3,084 (4.1)
Net sales
2,956
3,084
(4.1)

Operating profit

492

565

(13.0)

OPM (%) 16.6 18.3 (168)bp
OPM (%)
16.6
18.3
(168)bp

Net profit

293

333

(12.0)

Source: Company, Angel Research

Performance highlights

Top-line declines on a like for like basis

ACC posted a 3.4% yoy growth in its standalone top-line to `2,956cr. The company’s grey cement division posted a 2.4% yoy decline in top-line as volumes fell by 4.5% yoy and realizations improved only by 2% on a yoy basis. Thus, the yoy growth in topline was on account of the merger of RMC business with the company’s standalone operations w.e.f 4QCY2012.

OPM down on a yoy basis

OPM stood at 16.6% down 591bp on yoy basis, impacted by increase in raw

material and

freight costs and also due to low margins for the RMC business.

Freight costs rose on account of higher diesel prices and higher railway freight

charges

Per tonne analysis

During 1QCY2013, ACC’s realization/tonne improved by 2.6% yoy to `4,339. Power & fuel cost/tonne stood flat yoy at `1,012. The freight cost/tonne increased by 12.4% yoy to `960. The operating profit/tonne stood at `766, down 20.2% yoy.

Exhibit 4: Operational performance

Parameter (`)

1QCY13

4QCY12

1QCY12

yoy chg (%)

qoq chg (%)

Realization/tonne

4,339

4,302

4,231

2.6

0.9

Power and fuel cost /tonne

1,012

901

1,007

0.5

12.2

Freight cost/tonne

960

1,020

855

12.4

(5.8)

Other expenses/ tonne

938

1,074

713

31.7

(12.6)

Operating profit/tonne

766

670

960

(20.2)

14.4

Source: Company, Angel Research

Investment rationale ACC | 1QCY2013 Result Update Favorable capacity locati on to augur well for ACC

Investment rationale

ACC | 1QCY2013 Result Update

Favorable capacity location to augur well for ACC

Around 51% of ACC's total capacity is located in states where either cement supply is less than demand or, if it is more, the excess can economically be supplied to nearby supply-deficit states. Hence, all its capacities can rationally achieve higher utilization. Its entire south India plant capacity is in Karnataka and Tamil Nadu, where the demand-supply dynamics are far better than that in Andhra Pradesh.

Higher fuel availability for CPPs leading to lower power and fuel costs

Going ahead, we expect power and fuel cost to be lower for the company, as it currently has 85% self sufficiency in its power requirement with a 361MW captive power plant (CPP), and access to the highest coal linkage in the industry along with few captive coal blocks.

Outlook and valuation

We expect ACC to register a 8.2% yoy growth in its top-line over CY2012-14. The bottom-line is expected to post a CAGR of 10.6% over the same period. At current levels, the stock is trading at an EV/tonne of US$105 on CY2014E capacity. We maintain an Accumulate on the stock with a Target Price of `1,361.

Exhibit 5: EV/tonne band

300,000 250,000 200,000 150,000 100,000 50,000 0 EV/tonne $80 $110 $140 $170 EV (` mn) Oct-01
300,000
250,000
200,000
150,000
100,000
50,000
0
EV/tonne
$80
$110
$140
$170
EV (` mn)
Oct-01
Apr-02
Oct-02
Apr-03
Oct-03
Apr-04
Oct-04
Apr-05
Oct-05
Apr-06
Oct-06
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13

Source: BSE, Company, Angel Research;

ACC | 1QCY2013 Result Update Exhibit 6: Recommendation summary

ACC | 1QCY2013 Result Update
ACC | 1QCY2013 Result Update

Exhibit 6: Recommendation summary

Company

Reco

CMP

Tgt. Price

Upside

FY2015E

FY2015E

FY2013-15E

FY2015E

EV/tonne^

 

(`)

(`)

(%)

P/BV (x)

P/E (x)

EPS CAGR

RoE (%)

US $

ACC*

Accum

1,225

1,361

11.1

2.5

13.4

10.6

20.0

116

Ambuja Cements*

Neutral

186

-

-

2.7

15.3

9.1

18.6

157

India Cements

Neutral

88

-

-

0.7

8.1

24.6

8.8

64

JK Lakshmi

Neutral

105

143

36.6

0.7

4.7

13.9

15.8

36

Madras Cement

Neutral

245

-

-

1.7

8.7

24.6

21.3

86

Shree Cements

Neutral

4,622

-

-

2.9

12.5

15.2

25.4

153

UltraTech Cements Neutral

1,927

-

-

2.6

16.1

9.3

17.3

188

Source: Company, Angel Research; Note: *Y/E December; ^ Computed on TTM basis

Company Background

In 2005, ACC was acquired by the world's second largest cement company, Holcim. Currently, the Holcim Group in India (ACC and Ambuja Cements taken together) has the largest cement capacity in the country (57mtpa). ACC has a standalone total capacity of 30mtpa, with 16 cement plants spread across the country. Similar to UltraTech, the company is also a pan-India player but with a southern inclination (36% of its total capacity is in south as against 22% in north, 22% in east and northeast, 17% in central and 4% in west).

ACC | 1QCY2013 Result Update Profit & loss statement (Standalone) Y/E Dec. ( ` cr) CY09

ACC | 1QCY2013 Result Update

Profit & loss statement (Standalone)

Y/E Dec. (` cr)

CY09

CY10

CY11

CY12

CY13E

CY14E

Total Operating Income

8,191

7,976

9,660

11,356

11,979

13,254

% chg

12.5

(2.6)

21.1

17.6

5.5

10.6

Total Expenditure

5,547

6,163

7,761

9,154

9,659

10,482

Net Raw Materials

956

1,168

1,503

1,784

1,899

2,050

Other Mfg costs

1,540

1,599

2,183

2,382

2,426

2,618

Personnel

368

462

526

617

647

686

Other

2,684

2,935

3,549

4,370

4,687

5,127

EBITDA

2,644

1,812

1,899

2,203

2,320

2,772

% chg

52.6

(31.5)

4.8

16.0

5.3

19.5

(% of Net Sales)

32.9

23.5

20.1

19.8

19.7

21.3

Depreciation& Amortisation

342

393

475

559

573

545

EBIT

2,302

1,420

1,424

1,644

1,746

2,227

% chg

60.0

(38.3)

0.3

15.5

6.2

27.5

(% of Net Sales)

28.7

18.4

15.1

14.8

14.9

17.1

Interest & other Charges

84

57

97

115

84

79

Other Income

77

98

192

265

295

238

(% of PBT)

3.3

6.7

12.6

18.2

15.1

10.0

Recurring PBT

2,294

1,461

1,519

1,794

1,958

2,386

% chg

32.1

(36.3)

3.9

18.1

9.1

21.9

Extraordinary Expense/(Inc.)

-

-

-

335

-

(0)

PBT (reported)

2,294

1,461

1,519

1,459

1,958

2,386

Tax

688

341

215

390

509

668

(% of PBT)

30.0

23.4

14.2

26.8

26.0

28.0

Adjusted PAT

1,607

1,120

1,304

1,404

1,449

1,718

% chg

32.5

(30.3)

16.4

7.7

3.2

18.6

(% of Net Sales)

20.0

14.5

13.8

12.6

12.3

13.2

Basic EPS (`)

85.5

59.6

69.4

74.7

77.1

91.4

Fully Diluted EPS (`)

85.5

59.6

69.4

74.7

77.1

91.4

% chg

32.4

(30.3)

16.4

7.7

3.2

18.6

Balance sheet (Standalone) ACC | 1QCY2013 Result Update Y/E Dec. ( ` cr) CY09 CY10 CY11

Balance sheet (Standalone)

ACC | 1QCY2013 Result Update

Y/E Dec. (` cr)

CY09

CY10

CY11

CY12

CY13E

CY14E

SOURCES OF FUNDS

Equity Share Capital

188

188

188

188

188

188

Reserves & Surplus

5,828

6,282

7,004

7,195

7,966

8,881

Shareholders’ Funds

6,016

6,469

7,192

7,383

8,154

9,069

Deferred Tax Liab

567

524

511

163

138

113

Other Long term Liab

349

362

518

517

517

517

Long term prov

372

381

381

381

Total liab

123

157

157

157

Total Liabilities

6,932

7,355

8,717

8,601

9,347

10,237

APPLICATION OF FUNDS

Gross Block

6,826

8,077

9,645

10,219

10,484

10,749

Less: Acc. Depreciation

2,668

2,995

3,438

4,355

4,928

5,473

Net Block

4,158

5,082

6,208

5,864

5,556

5,276

Capital Work-in-Progress

2,156

1,563

366

311

1,046

1,781

Goodwill

-

-

-

-

-

-

Investments

1,476

1,703

1,625

2,554

2,555

2,655

Long term loans and adv.

-

-

448

564

564

564

Current Assets

2,256

2,753

3,343

2,634

2,945

3,326

Cash

708

980

1,653

678

484

658

Loans & Advances

554

624

388

489

582

693

Other

994

1,149

1,302

1,466

1,878

1,975

Current liabilities

3,114

3,746

3,273

3,325

3,318

3,365

Net Current Assets

(858)

(993)

70

(692)

(373)

(39)

Misc. Exp. not written off

-

-

-

-

-

-

Total Assets

6,932

7,355

8,717

8,601

9,347

10,237

ACC | 1QCY2013 Result Update Cash flow statem ent (Standalone) Y/E Dec. ( ` cr) CY09

ACC | 1QCY2013 Result Update

Cash flow statement (Standalone)

Y/E Dec. (` cr)

CY09

CY10

CY11

CY12

CY13E

CY14E

Profit before tax

2,294

1,461

1,519

1,459

1,958

2,386

Depreciation

342

393

475

559

573

545

Interest expense

84

57

97

115

84

79

Change in Working Capital

575

407

(391)

(294)

(513)

(161)

Less: Other income

77

98

192

265

295

238

Direct taxes paid

727

395

416

206

509

668

Others

-

-

258

335

-

-

Cash Flow from Operations

2,492

1,825

1,350

1,703

1,298

1,943

(Inc)/ Decin Fixed Assets

(1,544)

(657)

(432)

(552)

(1,000)

(1,000)

(Inc)/ Dec in Investments

(797)

(227)

78

(929)

(1)

(100)

Other income

77

98

192

265

295

238

Cash Flow from Investing

(2,264)

(786)

(162)

(1,216)

(706)

(862)

Issue of Equity

-

-

-

-

-

-

Inc./(Dec.) in loans

85

(43)

(13)

(339)

(25)

(25)

Dividend Paid (Incl. Tax)

505

667

609

625

677

803

Others

(420)

(710)

(622)

(964)

(702)

(828)

Cash Flow from Financing

84

57

(107)

497

84

79

Inc./(Dec.) in Cash

(276)

272

672

(974)

(194)

174

Opening Cash balances

984

708

980

1,653

678

484

Closing Cash balances

708

980

1,653

678

484

658

Key ratios ACC | 1QCY2013 Result Update Y/E Dec. CY09 CY10 CY11 CY12 CY13E CY14E Valuation

Key ratios

ACC | 1QCY2013 Result Update

Y/E Dec.

CY09

CY10

CY11

CY12

CY13E

CY14E

Valuation Ratio (x)

P/E (on FDEPS)

14.3

20.6

17.7

16.4

15.9

13.4

P/CEPS

11.8

15.2

12.9

14.2

11.4

10.2

P/BV

3.8

3.6

3.2

3.1

2.8

2.5

Dividend yield (%)

1.9

2.5

2.3

2.3

2.5

3.0

EV/Sales

2.4

2.5

2.2

1.8

1.7

1.4

EV/EBITDA

7.4

10.9

10.7

9.2

8.4

6.7

EV / Total Assets

2.8

2.7

2.3

2.3

2.1

1.8

Per Share Data (`)

EPS (Basic)

85.5

59.6

69.4

74.7

77.1

91.4

EPS (fully diluted)

85.5

59.6

69.4

74.7

77.1

91.4

Cash EPS

103.7

80.5

94.7

86.6

107.6

120.4

DPS

23.0

30.5

28.0

28.7

31.1

36.9

Book Value

320.1

344.2

382.7

392.8

433.9

482.5

DuPont Analysis (%)

EBIT margin

28.1

17.8

14.7

14.5

14.6

16.8

Tax retention ratio

70.0

76.6

85.8

73.2

74.0

72.0

Asset turnover (x)

1.8

1.6

1.8

1.9

1.9

1.9

ROIC (Post-tax)

35.1

21.4

22.3

20.4

20.4

22.7

Returns (%)

ROCE (Pre-tax)

36.3

19.9

17.7

19.0

19.5

22.7

Angel ROIC (Pre-tax)

90.8

49.8

34.8

32.5

33.8

42.8

ROE

29.4

17.9

19.1

19.3

18.6

20.0

Turnover ratios (x)

Asset Turnover (Gross Block)

1.3

1.1

1.1

1.1

1.2

1.2

Inventory / Sales (days)

35

39

38

36

41

43

Receivables (days)

11

9

7

8

10

9

Payables (days)

193

203

165

132

126

116

WC cycle (ex-cash) (days)

(57)

(81)

(67)

(47)

(34)

(21)

Solvency ratios (x)

Net debt to equity

(0.2)

(0.3)

(0.3)

(0.3)

(0.3)

(0.3)

Net debt to EBITDA

(0.5)

(1.0)

(1.2)

(1.1)

(1.1)

(1.0)

Interest Coverage (EBIT / Int.)

27.3

25.0

14.7

14.3

20.8

28.2

Research Team Tel: 022 - 39 357800 DISCLAIMER ACC | 1QCY2013 Result Update E- mail: research@angelbroking.com

Research Team Tel: 022 - 39357800

DISCLAIMER

ACC | 1QCY2013 Result Update

E-mail: research@angelbroking.com

Website: www.angelbroking.com

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so.

This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly.

Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past.

Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information.

Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement

ACC

  • 1. Analyst ownership of the stock

No

  • 2. Angel and its Group companies ownership of the stock

No

  • 3. Angel and its Group companies' Directors ownership of the stock

No

  • 4. Broking relationship with company covered

No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%)

Reduce (-5% to -15%)

Accumulate (5% to 15%)

Sell (< -15%)

Neutral (-5 to 5%)