MOSL: ACC (Buy)-Volumes exceed estimate-margins impacted by lower realizations, cost push
ACC: Volumes exceed estimate; margins impacted by lower realizations, cost push
(ACC IN, Mkt Cap USD3.9b, CMP INR1523, TP INR1771, 16% Upside, Buy)
- Volume beat, realizations below estimate: 3QCY18 volumes grew 10% YoY to 6.55mt (our estimate: 6.32mt), led by healthy demand and robust growth in value-added premium products. Cement realizations declined ~2% QoQ (+0.6% YoY) to INR4,778/t (est. of INR4,882) due to pricing pressure in key markets. Revenue grew 10% YoY to INR34.3b (our estimate: INR33.4b).
- Margins impacted by cost push: Blended cost/t increased 4% QoQ (+1% YoY) to INR4,560. Blended EBITDA/t stood at INR681 (-2% YoY, -26% QoQ; our estimate: INR837), resulting in EBITDA of INR 4.46b (+7% YoY, -33% QoQ; our estimate: INR5.3b). Operating margin came in at 13% (-0.32pp YoY, -4.35pp QoQ). Adj. PAT stood at INR2.09b (+18% YoY), as employee expenses included a charge of INR36m on account of the Employee Separation Scheme. Reported PAT grew 16% YoY to INR2.05b (our estimate: INR2.6b).
- Key highlights from investor presentation: (1) Slag prices increased on account of higher demand. However, raw-mix and source-mix optimization helped offset the impact of higher RM costs. (2) Freight cost/t increased YoY due to higher diesel prices. The company achieved a reduction in rail lead through route optimization. (3) RMC volumes grew 12% YoY to 7.34 lakh cu m; segment EBIT stood at INR211m.
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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