ACC Q1 results: Cementmaker ACC shares fell 2 percent in early trading on Friday reported a 60 percent YoY drop in consolidated net profit of Rs 227.35 crore in the June 2022 quarter, on the back of a rise in fuel costs and associated inflation. effects. ACC recorded a profit of Rs 569.45 crore in April-June 2021.
Consolidated sales increased by 15 percent to Rs 4,468 crore for the quarter under review, up from Rs 3,885 crore in the same period a year ago. On a QoQ basis, sales grew marginally at 0.9 percent from Rs. 4,427 crore in the previous quarter.
What should investors do now?
Goldman Sachs is “neutral” on ACC due to a sharp rise in the prices of pet coke and imported coal, which hit the company’s profits. It has a price target of Rs 2,100 on the counter, while the stock settled at Rs 2,156.40 on Thursday.
The brokerage said higher fuel prices impacted results in the June 2022 quarter. It does not expect Ultratech Cement, Shree Cement and Dalmia to see a similar EBITDA decline on a sequential basis.
Axis Securities said: “While ACC is well positioned in its key markets with better pricing and volume growth, we expect input costs to remain high and begin to decline from Q4CY22 onwards. Capacity expansion plans are progressing well and it is well prepared to benefit from the growth momentum in the next period
by leveraging the upcoming and expanded capacity in the Central India region that increases demand. This will also help the company gain market share that it has lost to other larger competitors over the years.”
“We value ACC at 11x its CY23E EV/EBITDA, taking into account the higher costs and waiting for margin improvement to arrive at a TP of Rs 2,010/share implying a 7 percent downward pressure on the CMP and therefore change the rating of BUY. to KEEP,” it read.
Foreign research firm Credit Suisse has kept the ‘neutral’ rating for the stock and lowered the price to Rs 2,000 from Rs 2,450 per share. The long-term outlook was intact despite short-term energy cost headwinds. The company posted in-line results with volume growth of 10.5 percent. Margins were impacted at Rs 526 per tonne by a sharp spike in energy costs. Credit Suisse lowers EBITDA/ton estimate to Rs 750/ton in CY22 and improves to Rs 970/1000/ton in CY23/24.
Motilal Oswal said in his report: “ACC reported a weak second-quarter result as EBITDA fell 51 percent year-on-year to Rs 4.25 billion (v/s estimated at Rs 4.29 billion) and OPM down 13pp at Rs 4.29 billion. year-on-year to 9.5 percent (v/s estimated at 9.9 percent). ). EBITDA/t declined 56 percent year-on-year to Rs 563. ACC has outperformed BSE Sensex in CY22 by 6 percent due to ongoing corporate actions (acquisition by the Adani group to be followed by an open offer); while other companies underperformed the index by 17-38 percent. We expect ACC’s EBITDA and earnings to decline at a CAGR of 4 percent and 6 percent over CY21-23, respectively. The stock trades at 12x CY23E EV/EBITDA (in line with the 10-year average one-year forward EV/EBITDA). We value ACC at 12x Mar’24E EV/EBITDA and lower it to Neutral with a revised TP of Rs 2,260 (v/s Rs 2,465 previously).”
Punit Patni, Equity Research Analyst, Swastika Investmart Ltd., said: “ACC Ltd. had a disappointing quarter due to rising raw material prices, freight and power costs and operating expenses. The results were in line with expectations; however, cost pressures are expected to continue in the coming quarters. Furthermore, current valuations leave little room for further upside potential. The cement sector is witnessing strong demand due to government pressure on infrastructure, rising CAPEX from both the public and private sectors, and a resurgence in housing demand, but the arrival of Adani Group has changed the whole equation. the industry is changing, as the majority of players have announced capacity expansions to maintain their market share, this can lead to oversupply and under-utilization of capacity. That is why we remain cautious on the sector and have a neutral rating on ACC Ltd.”
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