Analysts lauded ACC Ltd.'s cost-saving measures and higher realisations in the quarter ended September as they raised target prices for the cement maker.
Net profit of the company—that follows January-December financial year—rose 21% year-on-year to Rs 363.1 crore in the July-September period, according to an exchange filing. Its operating profit increased 20.5% to Rs 670.7 crore, while the margin stood at 19% compared with 15.8% a year ago.
That even prompted brokerages to maintain their bullish investment recommendation on ACC. Of the 45 analysts tracking the stock, 37 have a ‘buy' rating, six suggest a ‘hold' and the rest recommend a ‘sell'. The average of Bloomberg consensus 12-month target price implies an upside of nearly 8%.
Shares of ACC rose as much as 3.8% in early trade on Tuesday but pared most of the gains to trade 0.9% higher at Rs 1,576 apiece. That compares with a 0.34% rise in the Nifty 50 index.
Here's what brokerages have to say…
HSBC Global Research
- Maintains ‘Hold', raises target price to Rs 1,630 from Rs 1,440 apiece.
- Strong beat was driven largely by better-than-expected cost performance.
- Ebitda per tonne increased by 20% year-on-year to Rs 1,033.
- Ready concrete mix business continues to be a drag.
- Raises target price for Ambuja Cements to Rs 232 from Rs 210 apiece.
- Continues to value ACC and Ambuja at 10 times estimated CY21 Ebitda.
CITI
- Maintains ‘buy', hikes target price to Rs 2,075 from Rs 1,950 apiece.
- Third-quarter Ebitda rose 21% year-on-year on higher realisations.
- Lower costs offset in part by ready concrete mix weakness.
- Realizations were flattish in the south; down 3-4% across other regions.
- Checks suggest north prices are up by Rs 5-10/bag (1-3%) in October, centre/west flattish; south up by about Rs 5-40/bag (1-10%), east down by Rs 15/bag (4-5%).
- A gradual pick-up in demand from the commercial and industrial segment.
- ACC top pick with UltraTech Cement.
Jefferies
- Maintains ‘buy', raises target price to Rs 2,200 from Rs 1,900 apiece.
- ACC reported a sharp rise in purchases.
- Third-quarter purchases are the key numbers to focus on as it signals urgency on master supply agreement.
- Beat appears to be driven by cement realisation.
- Cost efficiency remains a theme.
CLSA
- Maintains ‘buy', raises target price to Rs 1,920 from Rs 1,730 apiece.
- ACC registers third consecutive quarter of better cost control.
- Capacity additions could be delayed, utilisation is unlikely to be a bottleneck for near-term growth.
- ACC is trading at a 25% discount to peers.
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