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MOSL: ACC (Buy)-Cost saving strategies yielding results

ACC: Cost saving strategies yielding results

(ACC IN, Mkt Cap USD5.6b, CMP INR2246, TP INR2692, 20% Upside, Buy)

 

Operating performance marginally above our estimate

• ACC's 3QCY21 operating performance was marginally above our estimate, led by higher-than-estimated realization (down 2% QoQ v/s our estimate of a 3% decline). EBITDA stood at INR7.1b (est. INR6.9b). EBITDA/t stood at INR1,083 (est. INR1,021).
• Its expansion plans are largely on track. It is likely to commission clinker/grinding capacity of 2.7mtpa/2.6mtpa by 1HCY22E and additional grinding capacity of 2.2mtpa by 1HCY23E. This should drive 9% volume CAGR over CY20-23E. Cost saving efficiencies (Project Parvat) and master supply agreement (MSA) with ACEM are yielding results. We maintain our CY21-23E EPS estimates and reiterate our Buy rating with a TP of INR2,692. 

Better realizations offset cost inflation

• Revenue/EBITDA/adjusted PAT increased by 6%/6%/12% YoY in 3QCY21 to INR37.5b/INR7.1b/INR4.5b and was -1%/+4%/+6% v/s our estimates. EBITDA margin stood at 19% v/s our estimate of 18%.
• Volumes rose 1% YoY to 6.57mt (est. 6.71mt). Cement realization fell 2% QoQ, better than our estimate of a 3% decline. Higher sales in better priced markets (Central India) helped ACC report better-than-estimated realization. RMC revenue rose 54% YoY and 19% QoQ.
• Blended cost/t stood in line at INR4,623 (+5% QoQ, +5% YoY) as the impact of energy cost inflation was offset by lower than expected freight cost. The variable cost of production rose INR131/t YoY and INR201/t QoQ.