MOSL: ACC (Buy)-Outperformance on volumes-big support to margins from cost curbs
ACC: Outperformance on volumes; big support to margins from cost curbs
(ACC IN, Mkt Cap USD3.6b, CMP INR1388, TP INR1838, 32% Upside, Buy)
- Volume beat, realizations below estimate: 4QCY18 volumes grew 8.4% YoY to 7.5mt (our estimate: 7.42mt). Cement realizations declined ~1.3% QoQ to INR4,714/t (our estimate: INR4,769/t) due to pricing pressure in key markets. Revenue grew 11% YoY to INR38.9b (our estimate: INR38.74b).
- Lower-than-estimated costs lead to margin beat: Blended cost/t increased 1% YoY (-1% QoQ) to INR4,514 (our estimate: INR4,583). Blended EBITDA/t rose 15% YoY (flat QoQ) to INR680 (our estimate: INR641), resulting in EBITDA of INR5.1b (+25% YoY, +14% QoQ; our estimate: INR4.75b). Operating margin came in at 13.1% (+1.41pp YoY, flat QoQ). The company reversed provisions related to incentives for its Gagal plant of INR5b and recorded the same in current tax adjustments for earlier years. Also, employee expenses included a charge of INR230m on account of the Employee Separation Scheme. Thus, adj. PAT stood at INR2.5b (+48% YoY) (our estimate: INR2.28b). Reported PAT came in at INR7.3b.
- CY18 performance: Volumes grew 8.3% YoY to 28.4mt, while sales increased 11.4% YoY to INR148b. EBITDA increased 13% YoY to INR21.15b, while PAT rose 22% YoY to INR10.7b.
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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