ACC shares Q4 results: Analysts see limited upside on Adani group stock

ACC, one of the largest cement producers in the country, reported a mixed performance in the March 2023 quarter as the company reported a 40 per cent decline in the net profit on the back of higher expenses. The muted performance of the company led to mixed reviews on the stock from analysts on Dalal Street, who see limited momentum in the stock.

Adani-owned ACC reported a 40 per cent decline in the consolidated net profit at Rs 236 crore for the quarter ended March 31, 2023. It reported a consolidated net profit of Rs 396 crore in the year-ago period. The cement producer's consolidated revenue from operations rose 8 per cent at Rs 4,791 crore in Q4FY23 as against Rs 4,427 crore in the year-ago period.

ACC's earnings before interest and taxes (EBIT) margins fell to 8.6 per cent from 12.2 per cent, a year ago. ACCs' power and fuel expenses fell 9.4 per cent, while total expenses rose 14 per cent on the back of higher input costs. The company also saw a one-off expense of 664.2 million rupees related to a restructuring cost.

Shares of ACC were trading flat at Rs 1,750 on Friday, with a market capitalization of less than Rs 33,000 crore. The company board, along with its earnings, announced a final dividend of Rs 9.25 per equity share.

Brokerage firms, reviewing the stock, are neutral-to-positive on the counter and see an upside potential of up to 14 per cent in the stock. They believe that operating performance was in line with the expectations and clarity over commissioning of the Ametha plant will be the key for the company.
 

ACC’s growth plans and its cost-saving initiatives will be the key monitorable. There is still a lack of clarity regarding the commissioning of the UP grinding unit. Though the cash balance has improved sequentially, it has significantly dropped from last year, said Motilal Oswal Financial Services.

"Apart from pressure on profitability, rise in other current assets (advance for coal) has led to a decline in cash balance. We value ACC at 10.5x FY25E EV/EBITDA to arrive at a target price of Rs 1,990 and reiterate our 'neutral' rating on the stock," it added. "We would wait for clarity on the company’s growth plans before becoming constructive on the stock."

In 2022, Adani Group had clinched a deal to acquire a controlling stake in Holcim; businesses in India for $10.5 billion, marking the ports-to-energy conglomerate's entry into the cement sector.
 

ACC has put up a decent operational performance for the quarter ending March 2023. Except for realisations, ACC fared well on all other fronts. volumes surged over 10 per cent YoY despite plant shutdown in Himachal Pradesh for nearly half the quarter; freight cost and fixed cost were down, said ICICI Securities which has a hold rating on the stock with a target price of Rs 1,832.

 

"Despite strong resilience in volumes and cost efficiency, we foresee a limited scope of an upward revision to our earnings estimates owing to meek realisation and continued weakness in the pricing environment. While Ambuja Cement has reiterated its plan to double capacity by FY28, the exact quantum of ACC’s role needs clarity," it said.  given there are concerns around Adani group finances.

 

ACC shares have fallen about 30 per cent in the year 2023 so far. The stock has been under pain since January 24, 2023, after US short-seller Hindenburg Research's scathing note on Adani Group companies alleging manipulations and malpractices. Adani Group, however, denied all allegations.

 

YES Securities sees it as a mixed-bag performance. For FY23, Revenue came in line with YES Securities to Rs 22,000 crore, backed by a strong volume of 38.6MT and NSR growth of 3 per cent YoY. EBITDA came 12 per cent below its expectations to Rs1,920 crore due to inflated costs.

 

Ametha Integrated Unit to be commissioned by Q2FY24 which will increase Clinker capacity by 3.30 MTPA and Grinding capacity by 1 MTPA, said YES Securities. "Currently we have a 'buy' rating on the stock; however, we shall review the same post the earnings conference call," it said.

 

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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