Shares of ACC Ltd. declined after analysts cut target price after the second quarter on account of operating profit missing estimates as costs surged, and slower volume growth and lower risk-reward than peers.
Net income of the cement maker—that follows calendar year as its fiscal—slumped 60% over the year earlier at Rs 227.35 crore in the quarter ended June, according to its exchange filing. That compares with the Rs 304 crore consensus estimate of analysts tracked by Bloomberg.
ACC Q2 CY23 (Consolidated, YoY)
Revenue up 15% at Rs 4,468.42 crore
Ebitda down 51% at Rs 426.23 crore
Ebitda margin at 9.54% vs 22.38%
Raw material costs rose 37%
Power and fuel costs jumped 58%
Freight costs increased 17%
Shares of ACC fell as much as 2.25% intraday, the most in six weeks, on Friday. The stock closed with nearly 1% loss. Trading volume was more than thrice the 30-day average, when markets closed.
The stock moved below the 50-day simple moving average, indicating potential downward price momentum. Of the 47 analysts tracking the company, 28 maintain a 'buy', 10 suggest a 'hold' and nine recommend a 'sell', according to Bloomberg data. The average of the 12-month consensus price target implies an upside of 7.8%.
Here's what analysts have to say about ACC's second-quarter results:
Reiterates 'underweight/attractive' with target price at Rs 2,050 apiece, an implied downside of 5.11%.
Ebitda miss was driven by weaker-than-expected performance on costs.
Higher input costs (raw materials, purchase of traded goods, power and fuel, freight) jumped 10% QoQ and drove overall costs by 9% QoQ.
High volumes and realisations aided revenue growth.
Sees potential for negative surprises on opex in the sector. ACC could be affected most among coverage companies, due to its high exposure to south region.
ACC's volume growth will lag peers in the medium term, due to low visibility in expansion and change of promoters.
Finds risk-reward more favourable for peers UltraTech Cement Ltd., Shree Cement Ltd. and Dalmia Bharat Ltd.
Downgrades to 'neutral' and cuts target price to Rs 2,260, an implied upside of 5%.
The stock outperformance versus other stocks is unwarranted given the weak performance.
Expects earnings to come under further pressure in Q3 CY22 due to high costs.
Cuts Ebitda estimates by 7%/4% and EPS estimates by 9%/4% for CY22/23, respectively.
The company is well placed to pursue growth opportunities.
Downgrades to 'reduce' from 'add' and cuts target price from Rs 2,180 to Rs 2,075, an implied downside of 1.82%.
Sharp increase in cost led to six-year low margin in Q2 CY2022.
High power and fuel costs led to 22% YoY rise in operating costs.
Commodity price deflation would aid demand recovery and ease cost pressures for cement makers post monsoon.
Recent correction in spot pet coke prices would likely ease energy cost pressures from Q4 CY2022.
Stock has outperformed its peers due to upcoming open-offer by Adani and sees limited upside for the stock.
Reiterates 'buy' and cuts target price from Rs 2,850 to Rs 2,600, still an implied upside of 20.35%.
Results in line with the brokerage's estimates, though they missed consensus estimates.
Reiterates expectations of huge structural improvements in ACC and Ambuja Cements after Adani Group announced a buyout of Holcim's stake in the two companies.
Ground checks suggest risk of rising inefficiency in the next few quarters at ACC and therefore muted performance.
The structural long-term arguments continue to hold true.
Cuts Ebitda estimates by 21%/11% for CY22/CY23.
Disclaimer: Adani Enterprises is in the process of acquiring a 49% stake in Quintillion Business Media Ltd., the owner of BQ Prime.
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