ICICI Direct has given Buy recommendation for ACC with a target price of Rs. 2250 in its research report issued on Feb 12, 2021
ICICI Direct’s research report on ACC
ACC reported EBITDA margin of 13.8%, EBITDA/t of Rs 742/t, lower than our estimate of 16.4%, Rs 871/t, respectively, although sales volumes (up 18.8% QoQ, flat YoY) broadly remained in line with our estimates. Strong rural demand along with revival of infrastructure projects supported sales volumes. RMC volumes, however, fell 21.5% YoY to 0.73 Mio (up 58.6% QoQ). While operating performance of ACC appear weak mainly due to lower margins, this is due to additional charge of Rs 129 crore in other expenses (pertaining to incentives receivable from government) that led to sharp contraction in margins. Adjusting for the same, EBITDA margins and EBITDA/t would have been 16.9% and Rs 909/t. Further, impairment loss of Rs 176 crore led to 14.6% QoQ dip in profits at PBT level to Rs 461 crore, which otherwise would have remained on expected lines. The company’s expansion plans are on track, which will be mainly funded through internal accruals. Of the total 6.2 MT new proposed capacity additions, the company has commissioned a new 1.4 MT grinding unit at Sindri, Jharkhand during January 2021, which will help strengthen its positioning in the eastern region. The board has recommended final dividend of Rs 14/share.
We retain BUY with a revised TP of Rs 2,250/share (valuing at 11.5x CY22E EV/EBITDA implying EV/t of ~$135) (earlier TP Rs 1950/share).