ACC Q2 Results Review: Volume Expansion Drives Profitability, Analysts Say
The Q2 earnings growth was driven by lower input costs. Power and fuel costs declined 33% year-on-year to Rs 886.6 crore.
Analysts are positive on ACC Ltd. capacity expansion in the medium term, with lower costs driving profitability in the second quarter.
The Adani Group-owned cement manufacturer posted a net profit of Rs 387.9 crore in the September quarter, compared to a net loss of Rs 87.3 crore in the same period last year, according to an exchange filing on Thursday. Analysts polled by Bloomberg estimated a net profit of Rs 334.2 crore.
ACC Q2 FY24 Highlights (Consolidated, YoY)
Revenue up 11% at Rs 4,434.7 crore (Bloomberg estimate: Rs 4,403.5 crore)
Ebitda up 33.53 times at Rs 549.3 crore (Bloomberg estimate: Rs 575.5 crore)
Ebitda margin at 12.39% vs 0.41% (Bloomberg estimate: 13.1%)
Net profit of Rs 387.9 crore vs net loss of Rs 87.3 crore (Bloomberg estimate: Rs 334.2 crore)
The earnings growth was driven by lower input costs. Power and fuel costs declined 33% year-on-year to Rs 886.6 crore. Revenue growth was supported by volume growth of 17% year-on-year at 8.1 million tonne, partially offset by lower realisations.
The cement business' profit before tax grew to Rs 336.9 crore, compared to a loss of Rs 142.3 crore, while the ready-mix concrete earnings rose 79% to Rs 3.3 crore.
Shares of ACC rose 1.9% during the day to Rs 1,936 apiece. It pared gains to trade 0.28% higher at Rs 1,905.15 apiece compared to a 0.82% advance in the benchmark NSE Nifty 50 as of 11:09 a.m.
It has declined by 22% year-to-date. Total traded volume stood at 1.6 times its 30-day average.
Twenty-nine out of the 42 analysts tracking ACC maintain a 'buy' rating on the stock, seven recommend a 'hold' and six suggest a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 15.9%.
Here's What Brokerages Say About ACC's Q2 Results
Jefferies
Maintains a 'buy' with a target price of Rs 2,325, implying a 21.5% upside.
Lower freight and other costs, as well as growth from a lower base, were the driving forces behind the Ebitda beat.
The company incurred approximately Rs 600 crore in capex during the first half of the fiscal, lower than the brokerage's run-rate capex estimate for the fiscal.
Kiln fuel costs were reduced by 42%, driven by fuel mix optimisation and higher alternate fuel consumption.
ACC's logistics effort has resulted in a road direct dispatch increase of 58% compared to 52% in the year-ago period.
A clinker facility in Ametha, Madhya Pradesh, of 3.3 million tonne capacity was commissioned in the quarter.
ICICI Securities
Upgrades ACC to 'buy' with a revised target of Rs 2,451 vs. Rs 2,338 earlier.
Valuations remain attractive given improving prices, volume gains from capacity commissioning, and a strong balance sheet.
While realisation fell 1.2% QoQ, a price uptick across India drove a 3% upward revision to FY24 and FY25 Ebitda estimates.
Cement prices are looking up across regions and are expected to sustain in the near term, based on the brokerage's channel checks.
Sequentially low Ebitda primarily on account of seasonality and low operating leverage.
Emkay Global Financial Services
Maintains 'buy' and raises target price by 2.8% to Rs 2,365, implying a 23.62% upside.
ACC's Ebitda miss is mainly due to a lower-than-expected realisation.
Healthy volume growth of 17% YoY was partly led by increased master-supply-agreement transactions with parent Ambuja Cements.
Brokerage increases Ebitda estimates by 5% for FY24, citing recent price hikes while maintaining FY25 and FY26 estimates.
The share of premium products improved by 150 basis points year-on-year to 32% of sales.
Motilal Oswal Financial Services
Maintains 'neutral' with a target price of Rs 2,150, implying a 12.4% upside.
Ebitda misses due to a lower blended realisation and a higher variable cost per tonne.
Profit-after-tax growth was driven by a sharp increase in other income, which tripled year-on-year.
Management indicates robust demand, driven by increased spending on housing and infrastructure projects.
The company witnessed a net addition of 534 dealers across various markets during the quarter.
Brokerage anticipates expansion to boost volume growth, particularly due to its robust presence in central India.
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