ACC target price Rs 1985; HDFC Securities maintains BUY rating

HDFC Securities highlight that during Q4 CY20, strong pricing in south and stable opex drove ACC’s consolidated revenue/EBITDA/APAT by 2/30/65% YoY to Rs 41.4/7.0/4.5 bn respectively. ACC commissioned its 1.4mn MT Sindri grinding unit in Jan’21 and expects to commission the greenfield plants (4.8mn MT) in central region by mid-2022, thus boosting its volume growth outlook. HDFC Securities maintains BUY rating on the stock with a revised target price of Rs 1985/share (10x Dec’22 Consolidated EBITDA). The current share price of ACC is Rs 1826, up Rs 7 or 0.4%.
 
ACC Q4 CY20 key highlights:
 

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Cement volumes fell 1% YoY constrained by capacity ex-south. NSR remained 5% higher YoY despite a 4% QoQ fall (mainly in east and south markets). Unitary opex (adjusted for one-off) rose 1% QoQ (stable YoY) on higher slag and fuel prices. Thus, unitary EBITDA rose 40% YoY to INR 844/MT. RMC division’s sales volume/revenue/ EBITDA fell 22/21/32% YoY to 0.73 cbm/ Rs  3.1 bn / Rs 0.5 bn respectively on lower demand in the infrastructure segment.
 
ACC’s Management Outlook:
 
During CY20, ACC generated OCF of Rs 22.2 bn (flat YoY) and spent Rs 7.5 bn in capex (vs Rs 4.9 bn YoY). It has accelerated capex spend Q4 CY20 towards its ongoing expansions. In Jan’21, ACC commissioned 1.4 mn MT SGU in Sindri (Jharkhand). It expects to commission its greenfield plants in the central market (4.8 mn MT) by mid-2021. This should boost its volume growth outlook CY22 onwards. We have marginally increased CY21/22E EBITDA estimates by 1/6% respectively. HDFC Securities maintains BUY rating on the stock with a revised target price of Rs 1985 / share (10x Dec’22 Consolidated EBITDA).