Result Analysis : ACC Ltd – Q3FY20

Result Analysis :  ACC Ltd – Q3FY20

CMP: 1,577 (As on 20-10-2020)

Total revenue from operations 3,537 Cr 

3,528 Cr (0.25%) YoY | 2,602 Cr (35.91%) QoQ 

9 months ending revenue: 9,641 Cr Vs. 11,597 Cr (-24.34%) 

Net Profit of 363.9 Cr 

302.5 Cr (20.12%) YoY 270.9 Cr (34.41%) QoQ 

9 months ending net profit: 957.9 Cr Vs. 1,104 Cr (-15.39%) 

EPS (in Rs.) 19.33

16.07 YoY |14.39 QoQ 

9 months ending EPS: 50.89 Vs. 58.65 

View: Result is above expectation. YoY revenue flat and very marginally up but profit up by more than 20% due to better cost efficiencies and highly controlled expenditure. Operating profit margin also improved in this quarter. QoQ revenue and profit both have up due to started economic activities and resume the business environment. 

Business Updates & Highlights

Q3FY20 EBITDA was around INR 671 Cr Vs. 557 Cr in Q3FY19 therefore up by 21% in YoY. EBITDA margin was around 19.4% Vs. 16.1% in YoY. EBITDA margin 330 bps improved in YoY.

9 months ending 2020 EBITDA was around INR 1,783 Cr Vs. 1,872 Cr in 9 month ending Sep 2019 therefore declined by 4.7% in YoY. 9MFY20 EBITDA margin was around 18.9% Vs. 16.5% in 9MFY19. Therefore EBITDA margin was also improved by 240 bps for 9MFY20.

Sales volume (cement) in Q3FY20 was around 6.49 Mt Vs. 6.44 Mt in Q3FY19.

Power & fuel cost has significantly reduced in this quarter from 784 Cr to 630 Cr almost 19.6%. Higher usage of AFR in the fuel mix and Improved operational efficiency. 

Also raw material cost declined in this quarter and reason for declining was operating efficiencies, source optimizations, negotiations and efficient supply chain management. 

Financial

ROE and ROCE is around INR 12% and 19% respectively and book value per share is around INR 632 and share is currently trading at 2.5x of its book value. Company is currently trading at annualized PE of 24 which is good as per Industry benchmark. Promoter holding is around 54.5% in the company which is strong and stable. FIIs and mutual fund hold around 12.8% and 6.7% in the company. Company is virtually debt free. 

Share View 

Share price high 1,590 (52 week) and now 1,562. ACC Limited (ACC) is a leading player in the Indian building materials space, with a pan-India operational and marketing presence. Synonymous with cement. The management control of company was taken over by Swiss cement major Holcim (now LafargeHolcim) in 2004. ACC operated as subsidiary of Lafarge Holcim. On 1 September 2006 the company is only Cement Company to get Superbrand status in India 

Position: Share support price is INR 1,350. Long term investor should continue with the company.

Opportunities 

 The demand has been better in retail and rural segment, with gradual pick up in demand from commercial and industrial segment. Further demand growth to be driven by affordable Housing and rural housing, roads and allied activities supported by good monsoons. Revival of infrastructure projects and construction. Cement business delivered strong operating performance, driven by efficiency improvement and better price realization. Margin also improved in this quarter by more than 330 bps. Better cost control mechanism in this quarter material cost, power & fuel cost, freight & forwarding cost down by more than double digit for higher operational efficiency. Operational efficiency and better negotiation will be work in longer run. 

Risk 

Continuing lock down in urban centres impacting RMX business segment. Company has also contingent liabilities of around INR 1,147 Cr which appeal is pending in Hon’ble Supreme court against COMPAT in case of any adverse order can direct impact the company bottom line significantly. 

Sources: Various publications

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

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