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MOSL: ACC (Buy)-Expansion provides growth visibility

ACC: Expansion provides growth visibility

(ACC IN, Mkt Cap USD5.4b, CMP INR2151, TP INR2480, 15% Upside, Buy)

 

Cost control to drive earnings growth

• ACC's 2QCY21 result surprised positively on strong cost control. Moreover, coupled with a better pricing environment, this led to EBITDA/t of INR1,279 - the highest since CY10 - despite higher energy costs.
• ACC's Central India expansion should be commissioned in 2HCY22, potentially driving a 9% volume CAGR over CY21-23E. We expect costs to remain in check, supported by a master supply agreement (MSA) with Ambuja as well as supply chain efficiencies. We raise our CY21/CY22 EPS estimate by 10%/8%, factoring in a better realization outlook. Reiterate Buy, with TP of INR2,480.

 Higher volume and better realization drive 21% beat on EBITDA

• Revenue / EBITDA / Adj PAT rose 49%/67%/93% YoY to INR38.8b/INR8.7b/INR5.7b and beat our estimate by 5%/21%/26% (led by higher volumes, better realization, and cost control).
• Volumes rose 44% YoY to 6.84mt (5% above est) on account of a low base. Blended EBITDA/t rose 19% QoQ (+16% YoY) to INR1,279/t (16% above est).
• While cement realization improved 5.7% QoQ (+2.1% YoY) to INR5,153/t (in-line), blended realization (including RMC and clinker sales) was up 5.5% QoQ (+3.9% YoY) to INR5,680/t.
• ACC used the weak demand in Jun-Q to build clinker inventory, which should support volume growth in 2HCY21 despite capacity limitations.