acc ltd. - i. · pdf filecement sales volume for acc during q3cy17 stood at 5.96 mt which ......

ACC Ltd.

RESULT UPDATE 18th October, 2017

2 Page

Result Highlights

• Total Sales stood at INR 31165 mn as against our estimate of INR 30500 which was up by 9.6% y-o-y and de-grew by 21.3% q-o-q. Volume growth stood at 17.5% y-o-y as against our estimate of 11% y-o-y reaching 5.96 MT (est. 5.63 MT) as against 5.07 MT last year.

• EBIDTA stood at INR 4158 mn which was up by 47.3% y-o-y and down 34.7% q-o-q and EBIDTA margin stood at 13.3% as against 11.4% same quarter last year. Lower than anticipated other expenses and power and fuel costs resulted in better than expected EBITDA margins (margins of 13.3% as against our estimate of 11.9%). Adj.PAT stood at INR 1815 mn which was up by 102.3% y-o-y and down 44.4% q-o-q. PAT Margin stood at 5.8%.

ACC Ltd. Sustained outperformance to continue !

CMP

INR 1781 Target

INR 2125 Potential Upside

19.3% Market Cap (INR Mn)

336674 Recommendation

BUY Sector

Cement

SHARE PRICE PERFORMANCE

Shares outs (Mn) 188

EquityCap (INR Mn) 1878

Mkt Cap (INR Mn) 336674

52 Wk H/L (INR) 1869/1257

Volume Avg (3m K) 528.2

Face Value (INR) 10

Bloomberg Code ACC IN

MARKET DATA

SENSEX 32584

NIFTY 10211

MARKET INFO

Investment rationale:

Volume growth above estimates:

Cement sales volume for ACC during Q3CY17 stood at 5.96 MT which grew by 17.5% y-o-y as against an estimated growth of 11% y-o-y. The company outperformed as against the industry growth rate on account of stabilization of new plants in Jamul and Sindri. Further, premium product volumes for the company grew by 18% y-o-y. Consequently, top-line for the company stood at INR 31165 mn which was higher by 9.6% y-o-y.

Going ahead, we expect volume outperformance for ACC to continue on account of presence in high growing regions. Likewise, we factor in a volume growth of 12.4% over CY16-CY18E growing from 23 MT to 29.3 MT. We reckon top-line for ACC to surge from INR 126877.2 mn in CY16 to INR 172268 mn in CY18E; a CAGR of 16.52%.

Operating efficiencies continue to beat estimates: Operating profit in Q3CY17 stood at INR 4158 mn; a growth of 47.3% y-o-y and was above our estimates of INR 3092 mn. EBITDA margins stood at 13.3% as compared to 11.46% during Q3CY16 and above our estimates of 11.9%. The operating margins were ahead of our estimates primarily on account of lower than anticipated other expenses and power and fuel costs. The company continued to focus on cost optimization; neutralizing the adverse hike in input costs. Going ahead, we expect enhancement in margins on the back of higher operating leverage and cost efficiency measures. We estimate EBITDA/ton to increase from INR 465 in CY16 to INR 781 in CY18 and EBITDA to increase from INR 14110 mn to INR 27751 mn over the same period; a robust growth of 40.2%. Valuation and Outlook: The company has been delivering exceptional performance during 9MCY17 with volume growth of 10% y-o-y and EBITDA growth of 23.3% y-o-y. With net cash and cash equivalents of INR 38502 mn on CY18E, the company trades at an EV/ton of $130; which is at ~40% discount to other large cap cement players primarily on account of lagging efficiencies. We factor in revenue/EBITDA CAGR of 16.5%/40.23% over CY16-CY18E. We believe that further improvement in operating efficiencies and capacity addition can act as a re-rating trigger for the company. We value ACC Ltd at an EV/EBITDA of 13x CY18E and arrive at a target price of INR 2125 which is an upside of 19.3% from CMP of INR 1781. ACC Ltd continues to remain our top pick among large-cap cement players and we maintain our BUY rating for the stock.

Particulars Jun 17 Mar 17 Dec 16

Promoters 54.53 54.53 54.53

FIIs 13.64 14.78 14.26

DIIs 16.97 16.23 16.68

Others 14.86 14.46 14.52

Total 100 100 100

SHARE HOLDING PATTERN (%)

Volume CAGR between CY 16 and CY 18E

12.4%

Revenue CAGR between CY 16 and CY 18E

16.5%

India Equity Institutional Research II Result Update - Q3CY17 II 18th October, 2017

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Sensex ACC Ltd

+91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com

KRChoksey Research is also available on Bloomberg KRCS<GO>

Thomson Reuters, Factset and Capital IQ

ANALYST Vaibhav Chowdhry, [email protected], +91-22-6696 5571 Kunal Shah, [email protected], +91-22-6696 5568

ACC Ltd.

Q3CY17 Result Snapshot Comments:

• Total Sales stood at INR 31165 mn as against our estimate of INR 30500 which was up by 9.6% y-o-y and de-grew by 21.3% q-o-q. Volume growth stood at 17.5% y-o-y as against our estimate of 11% y-o-y reaching 5.96 MT (est. 5.63 MT) as against 5.07 MT last year.

• EBIDTA stood at INR 4158 mn which was up by 47.3% y-o-y and down 34.7% q-o-q and EBIDTA margin stood at 13.3% as against 11.4% same quarter last year. Lower than anticipated other expenses and power and fuel costs resulted in better than expected EBITDA margins (margins of 13.3% as against our estimate of 11.9%).

• Adj.PAT stood at INR 1815 mn which was up by 102.3% y-o-y and down 44.4% q-o-q. PAT Margin stood at 5.8%. Volume outperformance and improvement in the operating efficiencies has led to a significant hike in PAT.

• Going forward, we believe with the Government’s enhanced focus on rural and affordable housing coupled with infrastructure development, we expect a sharp recovery in cement volumes from Q4CY17 onwards and we believe that the company is poised for re-rating if it can sustain similar volume growth and operating efficiencies.

Particulars (mn) Q3CY17 Q2CY17 Q3CY16 Q-O-Q Y-O-Y

Total Sales 31165 39589 28429 -21.3% 9.6%

Total Expenditure 27007 33221 25606 -18.7% 5.5%

Cost of Raw Materials 4453 4014 2908 10.9% 53.1%

Employee Cost 2013 2189 1875 -8.0% 7.4%

Power and Fuel Costs 6738 6852 5366 -1.7% 25.6%

Transportation costs 7995 8704 5954 -8.1% 34.3%

Other expenses 5808 6405 5837 -9.3% -0.5%

Excise duty paid on sales 0 5057 3666 -100.0% -100.0%

PBIDT (Excl OI) 4158 6369 2824 -34.7% 47.3%

EBITDA Margins (%) 13.3% 18.4% 11.4% -510bps 194bps

Depreciation 1560 1630 1539 -4.3% 1.4%

EBIT before Exceptional Item 2598 4739 1284 -45.2% 102.3%

Exceptional Items 0 0 0 - -

Other Income 243 265 274 -8.3% -11.5%

EBIT 2841 5003 1559 -43.2% 82.3%

Interest 203 216 211 -5.8% -3.7%

EBT 2638 4788 1348 -44.9% 95.7%

Tax 849 1556 445 -45.5% 90.7%

PAT 1815 3262 897 -44.4% 102.3%

PAT Margin (%) 5.8% 9.4% 3.6% -362bps 220bps

EPS 9.66 17.36 4.78 -44.4% 102.3%

3 Page

Source: Company, KRChoksey Research


Particulars (INR Mn) CY14 CY15 CY16 CY17E CY18E

Revenues 131081.80 132407.10 126877.20 152501.03 172268.00

EBITDA 14896.00 15278.50 14110.40 21951.51 27750.93

PAT 11506.30 5822.50 5964.40 10669.09 14519.33

EPS 61.27 31.00 31.76 56.81 77.31

P/E (x) 22.84 43.85 41.83 30.83 22.65

EV/EBITDA (x) 16.58 15.89 16.41 13.72 10.46


Key Financials





ACC Ltd. Financials

Balance Sheet (INR Mn) CY14 CY15 CY16 CY17E CY18E

Equity Share Capital 1879.50 1879.50 1879.90 1879.90 1879.90

Reserves 80476.60 82550.90 84734.50 92202.86 102366.39

Net worth 82356.10 84430.40 86614.40 94082.76 104246.29

Total loans 0.00 355.00 500.20 1000.00 1500.00

Capital Employed 88871 90676 94013 101993 112749

Net block 75130.20 76559.40 77232.00 73346.30 71866.01

Current Investments 12820.80 12011.50 15682.70 15682.70 15682.70

Inventories 12555.90 11886.00 12237.50 13518.22 14464.50

Sundry debtors 4107.10 4843.50 4677.30 5431.54 6135.57

Sundry creditors 7502.30 8741.10 12569.30 12998.29 13908.17

Cash and bank 3043.00 916.00 2755.80 13089.88 24319.28

Total Current assets 36511.40 33706.50 40325.00 53661.38 66371.59

Total Current liabilities 37842.10 38087.60 40862.10 42832.80 43806.19

Capital Deployed 88871 90676 94013 101993 112749

4 Page

Profit & Loss (INR Mn) CY14 CY15 CY16 CY17E CY18E

Total Sales 131081.80 132407.10 126877.2 152501.03 172268.00

COGS 19713.60 18481.20 16944.2 18977.50 20305.93

Employee Expenses 7465.90 7698.70 7783.1 8700.00 9570.00

Power and fuel 24418.20 23940.50 21571 26963.75 31008.31

Transportation cost 25983.30 27230.00 26546.6 31262.71 34453.60

Other Expenses 24905.10 25339.40 24628.1 26687.68 28854.89

Excise duty 13699.70 14438.80 15293.8 17957.87 20324.34

EBITDA 14896.00 15278.50 14110.4 21951.51 27750.93

D&A 5575.80 6520.60 6051.6 6277.50 6480.29

Other income 2682.80 1193.50 1127.1 1000.00 1200.00

EBIT 12003.00 9951.40 9185.9 16674.01 22470.64

Interest Expense 827.60 673.20 728.7 750.00 800.00

PBT 11175.40 9278.20 8457.2 15924.01 21670.64

Tax -330.90 1924.00 2064.7 5254.92 7151.31

Effective tax rate -2.96% 20.74% 24.41% 33.00% 33.00%

PAT 11506.30 5822.50 5964.4 10669.09 14519.33

Cash Flow (INR Mn) CY14 CY15 CY16 CY17E CY18E

PAT 11506.30 5822.50 5964.40 10669.09 14519.33

Depreciation & Amortization 5575.80 6520.60 6051.60 6277.50 6480.29

(Incr)/Decr in Working Capital 417.20 579.40 2087.50 -1519.78 -914.42

Cash Flow from Operating 13317.00 14612.40 13801.20 16176.81 20885.20

(Incr)/ Decr in Gross PP&E -15270.00 -11681.40 -5188.80 -2391.80 -5000.00

Cash Flow from Investing -14366.90 -9481.70 -5391.00 -2391.80 -5000.00

(Decr)/Incr in Debt -350.30 0.00 0.00 499.80 500.00

Dividend -6445.10 -5616.70 -3203.20 -3200.73 -4355.80

Finance costs -490.70 -414.90 -478.00 -750.00 -800.00

Cash Flow from Financing -8370.90 -6810.20 -4211.70 -3450.93 -4655.80

Incr/(Decr) in Balance Sheet Cash -9420.80 -1679.50 4198.50 10334.08 11229.40

Cash and cash equivalents at the Start of the Year 24990.60 15569.80 13890.30 2755.80 13089.88

Cash and cash equivalents at the End of the Year 15569.80 13890.30 18088.80 13089.88 24319.28









ACC Ltd.

Ratio Analysis CY14 CY15 CY16 CY17E CY18E

Particulars

EBITDA/ton 467.57 448.30 464.86 655.01 781.34

Volume (mn tons) 24.21 23.62 22.99 26.90 29.32

Growth (%)

Total Sales 4.94% 1.01% -4.18% 20.20% 12.96%

EBITDA -8.55% 2.57% -7.65% 55.57% 26.42%

PAT 5.01% -49.40% 2.44% 78.88% 36.09%

Profitability (%)

EBITDA Margin 12.69% 12.95% 12.65% 16.32% 18.26%

NPM 9.80% 4.94% 5.35% 7.93% 9.56%

Return ratios

ROE 13.97% 6.90% 6.89% 11.34% 13.93%

ROCE 13.51% 10.97% 9.77% 16.35% 19.93%

Per share data

EPS 61.27 31.00 31.76 56.81 77.31

BPS 438.53 449.58 461.21 500.97 555.09

Valuations (x)

P/E (x) 22.84 43.85 41.83 30.83 22.65

P/BV (x) 3.19 3.02 2.88 3.50 3.15

EV/EBITDA (x) 16.58 15.89 16.41 13.72 10.46

EV/Ton ($) 119.05 117.03 103.43 134.52 129.72

Net Debt/EBITDA -1.06 -0.82 -1.27 -1.27 -1.39

Net Debt/Equity -0.19 -0.15 -0.21 -0.30 -0.37

Interest Coverage 14.50 14.78 12.61 22.23 28.09

5 Page



Particulars (in INR) CY14 CY15 CY16 CY17E CY18E

Realization/ton 4359.94 4403.99 4275.39 4446.41 4624.26

COGS cost/ton 748.71 711.91 662.40 639.05 628.33

Employee cost/ton 283.55 296.56 304.27 292.96 296.13

Power and fuel cost/ton 927.39 922.21 843.28 907.97 959.50

Transportation and Handling cost/ton 986.83 1048.92 1037.79 1052.74 1066.10

Other Expenses/ton 945.88 976.09 962.79 898.68 892.86

EBITDA/ton 467.57 448.30 464.86 655.01 781.34


Operating metrics





ACC Ltd.

6 Page India Equity Institutional Research II Result Update - Q3CY17 II 18th October, 2017

ACC Ltd. Rating Legend

Date CMP (INR) TP (INR) Recommendation Our Rating Upside

18-Oct-17 1781 2125 BUY Buy More than 15%

18-July-17 1751 2075 BUY Accumulate 5% – 15%

24-Apr-17 1495 1542 HOLD Hold 0 – 5%

Reduce -5% – 0

Sell Less than – 5%

ANALYST CERTIFICATION:

We, Vaibhav Chowdhry (B.Com, MBA), research analyst and Kunal Shah (BE), Senior research associate, author and the name subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect my views about the subject issuer(s) or securities. I also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

Terms & Conditions and other disclosures:

KRChoksey Shares and Securities Pvt. Ltd (hereinafter referred to as KRCSSPL) is a registered member of National Stock Exchange of India Limited, Bombay Stock Exchange Limited and MCX Stock Exchange Limited. KRCSSPL is a registered Research Entity vides SEBI Registration No. INH000001295 under SEBI (Research Analyst) Regulations, 2014.

We submit that no material disciplinary action has been taken on KRCSSPL and its associates (Group Companies) by any Regulatory Authority impacting Equity Research Analysis activities.

KRCSSPL prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analyst covers.

The information and opinions in this report have been prepared by KRCSSPL and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of KRCSSPL. While we would endeavor to update the information herein on a reasonable basis, KRCSSPL is not under any obligation to update the information. Also, there may be regulatory, compliance or other reasons that may prevent KRCSSPL from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or KRCSSPL policies, in circumstances where KRCSSPL might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. KRCSSPL will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. KRCSSPL accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. Our employees in sales and marketing team, dealers and other professionals may provide oral or written market commentary or trading strategies that reflect opinions that are contrary to the opinions expressed herein, .In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest.

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It is confirmed that, Vaibhav Chowdhry (B.Com, MBA), research analyst and Kunal Shah (BE), Senior research associate, of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific brokerage service transactions.

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acc ltd. - i. · pdf filecement sales volume for acc during q3cy17 stood at 5.96 mt which ......

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