ACC shares zoom 8% post results; here's what brokerages say

Shares of Cement maker ACC Ltd were on a roll on Wednesday and jumped over 8 per cent to hit an intraday high of Rs 2217.50 on BSE after the company posted results for the first quarter ended March 2022.

ACC Ltd reported a 29.5 per cent decline in consolidated net profit to Rs 396.33 crore for the first quarter ended March 2022, mainly due to the rise in fuel cost. The company, which follows the January-December financial year, had posted a profit of Rs 562.59 crore a year ago.

However, its total revenue from operations during the January-March quarter increased 3.13 per cent to Rs 4,426.54 crore against Rs 4,291.97 crore in the year-ago period.

The stock opened a tad higher at Rs 2,063 against the previous close of Rs 2057.90. With a market capitalisation of more than Rs 41,000 crore, the shares stand higher than 5 day, 20 day, 50 day and 100 day moving averages but lower than 200 day moving averages.

IDBI Capital said that ACC’s Q1CY22 EBITDA is lower than the estimate by 20%. Weak result is led by volume at -4 per cent year-on-year (YoY) versus the est. of +2% (which was factored in due to capacity addition) and QoQ price hike of 1% vs est. of 2%.

"We are maintaining 'Buy' rating on the stock as industry has taken price hike in April-22 to counter cost inflation. Fuel cost inflation is almost 100% QoQ in Q1CY22 and ACC in Q1CY22 result has benefited from low cost fuel inventory. Target price is revised to Rs 2462," the brokerage firm added.

Brokerage house ICICI Securities said ACC’s Q1CY22 EBITDA was broadly in-line with consensus estimates. Factoring in higher cost escalations, we cut our CY22E-CY23E EBITDA by 16-3% and reduce our target price to Rs 2,615 per share (earlier: Rs2,710/sh) based on 11x Mar’24E EV/E, it added.

"While ACC is well-positioned in its key markets with better pricing and volume growth, we foresee input costs to remain elevated in the near future. However, it is well-poised to capitalize on the growth momentum in the ensuing period by tapping its upcoming and expanded capacity in demand accretive Central India region. This will also aid the company in gaining market share which it lost to other larger peers over the years," Axis Securities said in its recent report.

"Furthermore, with its sharp focus on cost optimization measures under project PARVAT, increased government focus on infrastructure, housing and commercial development, we expect the company to register Revenue/EBITDA/APAT CAGR of 11/6/9 per cent over CY21-CY23E, driven by volume CAGR of 7 per cent and consistent realization improvement of 3% over CY21E-23E," it said.

"The stock is currently trading at 11x & 9x its CY22E and CY23E EV/EBITDA which is attractive compared to other larger peers in the industry. We value ACC at 10x its CY23E EV/EBITDA to arrive at a target price of Rs 2,300 per share," the brokerage house added.