Maintain ‘buy’ on ACC with target price of Rs 1,830

RMC revenues declined 41% YoY to Rs 2bn led by 51% YoY decline in volumes on continued lockdown in city centres.

ACC proceed to shock positively for third consecutive quarter with Q3CY20 EBITDA growing 21% YoY to Rs 6.7bn – greater than our /consensus estimates. Volumes grew 1.4% YoY vs our estimate of 2% YoY decline; whereas realisation grew 2.8% YoY (I-Sec: 2% YoY). Cement EBITDA/te elevated 25% YoY to Rs 1,015/te; whereas blended EBITDA/te grew 19% YoY to Rs 991/te. ACC’s value effectivity programme ‘Parvat’ which appears to be concentrating on value financial savings of Rs 150-200/te and elevated traction in MSA with ACEM would drive sustainable enchancment in ACC’s profitability, in our view. Factoring-in higher margin, we improve our CY20E-CY21E EBITDA 6-7% and lift our target price to Rs 1,830/share (earlier: Rs 1,625) primarily based on 9x Sep’22E EV/E on half-yearly roll-over. Maintain BUY.

Revenues stood flat YoY at Rs 34.7bn (I-Sec: Rs 33.3bn): Grey cement realisation elevated 2.8% YoY (declined 3.4% QoQ) to Rs 4,877/te primarily led by robust low double-digit improve in South. Cement costs have additional elevated by Rs 10- 20/bag throughout most areas w.e.f. Oct’20 primarily to mitigate current value will increase and common pan-India costs at the moment are up ~6% YoY. Volumes together with clinker gross sales elevated 1.4% YoY (broadly in-line with business common) to six.77mnte owing to improved demand in retail and rural segments, with gradual pick-up in demand from business and industrial segments too. Management expects elevated authorities thrust on reasonably priced housing and infrastructure, and matched with improved rural housing demand, would drive cement demand within the close to time period.

RMC revenues declined 41% YoY to Rs 2bn led by 51% YoY decline in volumes on continued lockdown in city centres. RMC EBITDA loss stood at Rs 160mn vs optimistic EBITDA of Rs 154mn in Q3CY19. Other working revenue elevated 9% YoY / declined 15% QoQ to Rs 698mn.

Cement value/te declined 1.5% YoY/ 2.9% QoQ to Rs 3,965/te. Purchase of third- get together merchandise elevated sharply from Rs 0.9bn to Rs 2.3bn primarily led by MSA with ACEM. Excluding these, uncooked materials plus energy and gasoline plus freight value/te declined 6% YoY (flat QoQ) on optimisation of supply combine, higher supply-chain administration, greater utilization of AFR within the gasoline combine and improved operational efficiencies.

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