ACC an underperformer; target of Rs 761: Karvy

Karvy Stock Broking has recommended underperformer rating on ACC with a target price of Rs 761, in its February 2010 research report.

“ACC has reported full year result; so Q4CY09 result is derived from the annual numbers which is below our expectation due to sharp increase in other expenses. Net sales grew by 1.9% yoy to Rs 19.2bn against our expectation of Rs 19.7bn on the back of volume growth of 2.9% to 5.3mn tones. Decline in cement realization by 6.9% to Rs 3625/tones and increase in other expenses by 31% sequentially has suppressed the EBIDTA margin by 1150bps to 22.4% and EBIDTA/tone by 35.5% to Rs 813/tones. Net profit has gone down by 6.5% on yoy basis to Rs 2.8bn, sharply below our estimates of Rs 3.83bn due to lower than expected realization, sharp increase in other expenses coupled with higher provision for depreciation.”

ALSO READ See previous views by Karvy Stock Broking See what other Experts & Brokerages are saying about ACC See messages about ACC

“We have increased our sales volume estimates by 3% for CY10, post commissioning of new plant which has upgraded our earning estimates by 7.5% for CY10. Cement industry has added around 25mn tons of new capacity during last 9 months and an additional 40mn tons likely to be commissioned over the next one year. That would result into lower capacity utilization and pressure on cement prices. At the current market price of Rs. 850, the company is trading at PER multiple of 14.1x and EV/EBIDTA multiple of 8x on CY10E earnings. We have valued the company on EV/EBIDTA multiple 6x and rate the company as an underperformer with revised price target of Rs.761 (from Rs 687),” says Karvy Stock Broking research report.

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