MOSL: ACC (Neutral)-Capacity ramp-up and favorable base drive volume growth
​ACC: Capacity ramp-up and favorable base drive volume growth
(ACC IN, Mkt Cap USD5.0b, CMP INR1785, TP INR1797, 1% Upside, Neutral)
- Strong volume growth led by favorable base and capacity ramp-up: 3QCY17 volumes increased 18% YoY to 5.96mt (est. of 5.88mt), led by ramp-up of new capacity in the east and a favorable base. Cement realization of INR4,645/t (+6% YoY, +3% QoQ) came in higher than our estimate, partly due to a change in commercial terms (INR114/t impact). The residual increase in realization (INR22/t QoQ) was due to better pricing in the underlying markets. Hence, revenue increased 24% YoY to INR30.5b (est. of INR28.6b).
- Healthy realizations drive EBITDA/t improvement YoY: EBITDA increased 57% YoY to INR3.53b (est. of INR2.86b), led by EBITDA/t of INR592 (+36% YoY; cement EBITDA/t at INR568). Unitary cost rose 2% YoY, led by an increase in power & fuel cost (+7% YoY) and freight cost (+14% YoY; change in commercial terms). Cost push was partly negated by lower other expenditure. Other operating income declined 48% QoQ due to incentives booked in 2QCY17 associated with one of the plants.
- Key highlights from management presentation on cost curve: 1) Raw material cost/t increased 14% YoY due to a rise in slag price and sourcing of flyash from long lead distances. 2) Power & fuel cost/t increased by 7% YoY due to a rise in petcoke prices, and also higher cost of domestic coal due to unavailability. 3) Freight cost/t excluding the impact of commercial terms declined 2% YoY due to lower lead distance of rail.
Acc is a cement and concrete manufacturing group based in India. Co. is predominantly engaged in the production and selling ordinary portland cements, composite cements and special cements and ready mix concrete. In addition, Co. is engaged in the provision of consultancy services for the overseas markets and real estate development. Through its subsidiaries, Co. is also engaged in manufacturing and selling of rubber tire, cement machinery, part of machinery and cast articles of alloy steel; trading in cement transportation; and distributing bulk cement. Co.'s operations are organized along two primary business segments: Cement and Ready Mix Concrete.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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