ACC's Q3CY21 EBITDA came in-line with our and consensus estimate. Volume in the quarter has increased by 1% YoY and is lower than UTCEM due to ACC’s exposure in east and south. East region volume was impacted due to excessive rainfall. ACC planned capacity addition in central region, will provide much needed growth. ACC capacity to increase by 11% yoy in CY22E, said, IDBI Capital Equity Research.
"On demand ACC expects industrial and commercial construction to witness revival on back of: a) Deferred investments from previous fiscal. b) Implementation of PLI (Production Linked Incentive) scheme. And c) Warehousing space to more than double over next 5 years due to e-commerce boom. We value the stock at +1STD of its last 10 year mean and arrive at TP of Rs 2,563. Catalyst for stock performance is capacity addition and price hike. Retain Hold rating," the broking firm added.
Key Highlights and Investment rationale
Snapshot: ACC Q3CY21 Revenue / EBITDA increased by 6% / 6% YoY. Operationally, volume increased by 1% YoY at 6.6mt. Opex/t was up 2% YoY at Rs4190/t. Higher Opex/t is driven by raw material cost (up 29% YoY). Q3CY21 EBITDA/t was Rs 1,083 versus Rs 1,279 QoQ, lower EBITDA/t is led by a) lower ASP by 1% QoQ, b) higher QoQ Opex/t by 3%. ACC reported PAT of Rs 4.5 billion (up 24% YoY).
Cost control initiatives on track: For ACC, Project Parvat continues to reinvigorate culture of Cost Consciousness and other cost measures that is Best Cost country (BCC) sourcing, target best costing, and efficiency improvements is in full swing. This is expected to partially absorb high cost of fuel.
Capacity utilization: YTDCY21 ACC operated at 82% utilization and we expect this to increase in Q4CY21. Central government election in 2024 to further improve utilization led by increased infra construction. We have introduced CY23E in our estimate and Post commissioning of capacity in CY22E, we expect ACC utilization at 85% in CY23E.
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