MOSL: ACC (Neutral)-Volume growth led by capacity expansions
​ACC: Volume growth led by capacity expansions
(ACC IN, Mkt Cap USD4.2b, CMP INR1497, TP INR1521, 2% Upside, Neutral)
Volume trend reversal after three quarters: 1QCY17 volumes increased 3.8% YoY to 6.60mt (est. of 6.49mt), led by ramp-up of new capacity in the east. Cement realization of INR4,265/t (+4% YoY, -2% QoQ) was marginally below our estimate of INR4,297/t. However, the full impact of price hikes initiated in February/March 2017 would be reflected in realization improvement in 2QCY17. RMC volumes rose 8% YoY, led by higher sales of value-added products. Revenue increased 8% YoY to INR30.99b (est. of INR30.9b), led by volume growth in both Cement and RMC.
Margin beat led by lower other expenses: EBITDA declined 9% YoY to INR3.42b (above-estimate), translating into margin of 11.0% (-231pp YoY, +250pp QoQ). EBITDA/ton fell 14% YoY (+33% QoQ) to INR476 (above-estimate). Unitary cost rose 7% YoY (-6% QoQ) to INR4,179/t (est. of INR4,470) due to higher power & fuel/freight cost, partially offset by positive operating leverage. Other expenses were lower as financials were restated with ACC adopting Ind-AS accounting effective 1 January 2017.
New plants in east improving profitability: The ramp-up of two new grinding units in Jamul and Sindri led to a reversal in volumes in 1QCY17. We expect margin improvement to be driven by ramp-up of these new units as their profitability is higher than the company's other plants.
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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