Motilal Oswal is bullish on ACC and has recommended buy rating on the stock with a target of Rs 1713 in its July 24, 2014 research report.
"ACC's 2QCY14 revenue grew 8% YoY to ~INR30.1b (v/s est. INR29.8b). Cement business net sales (ex RMC) grew by 7.3% YoY (+1% QoQ) to INR28.2b (v/s est. of INR28b). Cement volumes grew 3.8% YoY to 6.35mt (in line with 6.36mt); cement realizations were higher by 3.1% QoQ at ~INR4,437/ton (in line with est. of INR4,404/ton). RMC revenue grew +16% YoY/+7.5% QoQ and stood at INR1.9b (v/s est. of INR1.8b), while PBT stood at ~INR64m (v/s negative INR2m in 2QCY13 v/s ~INR32m in 1QCY14). EBITDA stood at ~INR4b, -8% YoY and +9% QoQ (v/s est. of INR3.9b). It translates into EBITDA margin of 13.3% (v/s est. of 13% and +1pp QoQ, -2.2pp YoY) and blended EBITDA/ton (including RMC) of INR630 (v/s est. of INR611). Cement EBITDA/ton was at INR612 (+INR61 QoQ/-INR89 YoY) v/s estimate of INR600. Lower other income and higher tax restricted PAT to ~INR2.4b (v/s est. of ~INR2.65b), a decline of 7% YoY."
"We lower the EPS for CY14E/15E by ~9%/5.5% to INR52/86 respectively to factor (a) higher employee cost on account wage settlement (assuming ~INR300m impact) and (b) higher tax rates. The stock trades at an EV of 16.2x/10x CY14E/CY15E EBITDA and USD126/117 per ton. Maintain Buy with a target price of INR1,713 (at USD150/ton or implied EV/EBITDA of 12x CY15E EV/EBITDA) including synergy benefits," says Motilal Oswal research report.
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