ACC: Tide is turning in its favour

Despite weak realisation, company posts strong volume growth and operating performance

ACC's performance for the quarter ended March impressed the Street on the volumes front. Cement volumes at 6.36 million tonnes (mt) were up 6.2 per cent sequentially and 9.3 per cent year-on-year. Costs remained in check and, consequently, operating Ebitda (earnings before interest, tax, depreciation, and amortisation) at Rs 433.6 crore was better than Rs 279.7 crore in the December quarter and ahead of the Rs 338 crore estimated by analysts, according to a Bloomberg poll.

As a result, ACC earned an Ebitda of Rs 682 per tonne, as compared to Rs 405 per tonne in the December quarter.

Some gains from higher volumes and lower costs were offset by a dip in realisation. Per-tonne cement realisations at Rs 4,345 came lower than Rs 4,955 in the year-ago quarter and Rs 4,518 in the previous quarter as the average all-India price at Rs 290 per 50-kg bag was down 5.5 per cent year-on-year and 1.4 per cent compared to the December 2015 quarter. With realisations coming below estimates, revenues at Rs 2,927 crore were about two per cent short of estimates of Rs 2,988 crore.

  With robust volumes and better-than-expected operating performance, net profit at Rs 232 crore beat estimates of Rs 187 crore. Thus, on a day when broader indices ended 1.8 per cent lower, ACC's share price closed half a per cent up at Rs 1,437.

The June quarter should be better than the March quarter in terms of realisations, given the price hikes last month. Further, with cement demand and realisations anticipated to improve in the coming days, pushed by infrastructure and rural recovery, prospects remain good for pan-India player ACC. Notably, ACC which has lagged peers on the volume front due to delayed capacity additions, should gain as its new 2.5-mt capacity in east India goes on stream soon.

The only flip side is that after a 20 per cent run-up in its share price from February lows, analysts don't see much upside in the immediate term. Siddharth Purohit at Angel Broking says the stock is likely to remain range-bound, given the recent run-up in the stock price.