>ACC (CITI)

Sell: 4Q PAT Betters Forecasts on Other Income, Lower Costs


* Derived 4Q PAT rises 5% YoY — ACC's 4Q PAT (derived from reported CY08
results) came in higher-than-expected at Rs3bn vs. our forecast of Rs2.1bn,
largely due to higher other income. 4Q EBITDA fell only 1% YoY due to lower
raw material & other expenses. Adj PAT for CY08 was Rs11.9bn (-8%) and
sales grew 5% to Rs73bn. CY08 volumes grew 5% and realizations fell 1% YoY.

* Volumes pick up, but some pricing pressure in 4Q — Volumes have been
sluggish for ACC until 3Q, but have picked up with ACC reporting a 9% growth
in 4QCY08. Volume growth should continue to be robust in the range of 9-12%
in the coming months. Realizations fell 2% YoY and 4% QoQ in 4Q. The
sequential decline is more than the 1% reported by the other majors.

* Benefiting from lower costs — 4Q profits were better than we expected for two
reasons: 1) Other income was higher due to write back of previous provisions,
insurance settlements and sale of scrap. 2) Costs were lower due to a better
coal mix, some productivity benefits in raw materials and completion of large IT
contracts recorded in other expenses. Most of these cost savings should
continue in the coming quarters.

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