MOSL: ACC (Neutral)-Strong volume growth-lower realizations impact margins
ACC: Strong volume growth; lower realizations impact margins
(ACC IN, Mkt Cap USD4.8b, CMP INR1692, TP INR1781, 5% Upside, Neutral)
- Strong volume growth led by capacity ramp-up: 4QCY17 volume increased 27% YoY to 6.92mt (est. of 6.61mt), led by ramp-up of new capacity in the east and also market share gains. Cement realization declined 4% QoQ (+2% YoY) to INR4,477/t (est. of INR4,705) due to weak pricing in the south and central region. Revenue increased 30% YoY to INR34.2b (est. of INR34.7b).
- Lower realizations impact margin sequentially: Cost/t increased 1% YoY to INR4,459/t, led by a 5% YoY increase in P&F cost (higher petcoke prices) and an 11% YoY increase in freight cost ( change in commercial terms). The sequential decline of 2% in cost/t is driven by a 9% QoQ decline in P&F cost due to efficiency improvement. EBITDA/t increased 17% YoY to INR479 (vs est. 532; -19% QoQ), resulting in EBITDA growth of 49% YoY to INR3.31b. Tax rate was higher at 31% v/s 5% in 3QFY17, resulting in adj. PAT of INR1.8b (+47% YoY).
- Key highlights from management presentation on cost curve: 1) Strong growth in south, north and central markets. 2) Raw material cost/t increased due to higher slag price. 3) P&F cost/t increased due to higher petcoke prices. 4) Freight cost/t declined due to lower lead distances.
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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