EUR 120.00 For Business Accounts Only

MOSL: ACC (Buy)-Continues to deliver on cost and volumes

ACC: Continues to deliver on cost and volumes

(ACC IN, Mkt Cap USD3.9b, CMP INR1501, TP INR1790, 19% Upside, Buy)

 

Capacity expansion to drive growth, valuations attractive

• ACC's 4QCY19 result reflects management's efforts to reduce costs and maintain market share. Volumes increased 4% YoY in a weak market demand environment. Notably, ACC has delivered 8% CAGR in volumes over CY16-19, as against all-India growth of 7%.
• Costs declined further by 2% QoQ to INR4,536/t. We maintain our CY20/21 estimates and Buy rating. 

Miss led by lower realization

• Volumes were up 4% YoY at 7.8mt, driving a 4% YoY increase in revenue to INR40.6b.
• Unitary cost declined 1% YoY (-2% QoQ) to INR4,536/t. Cost reduction was a result of better source mix optimization, logistics efficiency and better supply chain management.
• However, cement realization declined 5% QoQ (+0.5% YoY) to INR4,615/t (our estimate: INR4,689) due to weak pricing in its key markets.
• Subsequently, EBITDA/t declined 19% QoQ (+7% YoY) to INR697 (our estimate: INR778). EBITDA of INR5.4b (+11% YoY) missed our estimate by 9%; margin was at 13.3% (+0.81pp YoY, -2.46pp QoQ).
• PAT was up 17% YoY at INR2.7b - 17% below our estimate.
• CY19 performance: Net Sales for CY19 increased ~6% YoY led by 2% YoY increase in volumes and 3% YoY increase in realizations. EBITDA increased 18% YoY to INR24b with margins expanding 1.57pp. PAT increased 35% YoY to INR13.5b.