>ACC: reported net sales and net profit of Rs 2020.7 crore

ACC reported net sales and net profit of Rs 2020.7 crore (-2.9% YoY, 3.9% QoQ) and Rs 358.9 crore (-26.1% YoY, -11.4% QoQ), respectively, in Q2CY10. These were in line with our respective estimates of Rs 2006.3 crore and Rs 380.8 crore, respectively. The EBITDA margin has declined 789 bps YoY (223 bps QoQ) to 27.4% in the quarter. ACC is adding 3 million tonnes (MTPA) at Chanda, Maharashtra, which will take its installed capacity to 30 MTPA by Q3CY10E. Considering the expansion, we expect volume growth of ~6% CAGR (CY09-11E). Cement realisations are expected to be under pressure in CY10E on account of a decline in capacity utilisation led by oversupply scenario during CY09-10. However, we expect cement prices to increase in CY11E on account of increase in utilisation rates. Increase in fuel prices and freight rates would keep margins under check, going forward.

■ Sales volumes declines 5.6% QoQ, realisation improves 1.8% QoQ
ACC reported sales volume of 5.27 MTPA that declined 2.8% YoY and 5.6% QoQ. Volumes declined on account of unavailability of railway wagons, inadequate supply of critical raw materials like slag and fly ash and delays in stabilisation of the recently commissioned new cement units. Net realisation has increased by 1.8% QoQ to Rs 3834 per tonne while it has remained flat YoY.

■ EBITDA per tonne declined 22.5% YoY, 5.9% QoQ on cost increase
The company reported an EBITDA per tonne of Rs 1049, which declined by 22.5% YoY and 5.9% QoQ. This was on account of 12% YoY (5% QoQ) increase in total expenditure to Rs 2785 per tonne.

Valuation
At the CMP of Rs 825, the stock is trading at 12.2x and 12.2x its CY10E and CY11E earnings, respectively. The stock is trading at an EV/EBITDA of 7.1x and 6.1x CY10E and CY11E EBITDA, respectively. On an EV/tonne basis, the stock is trading at $113 and $99 its CY10E and CY11E capacities, respectively. We have valued the stock at $110/tonne (8% discount to current replacement cost of $120/tonne) at its CY11E capacity of 30 MTPA and maintained our ADD rating with revised target price of Rs 9 03 per share.

To read the full report: ACC