Increase in sale of premium cement, as well as cost optimisation, has helped. Thus, earnings before interest, tax, depreciation, and amortisation (Ebitda) at Rs 586 crore grew 10 per cent, beating consensus estimates of Rs 525 crore.
Consequently, the net profit of Rs 323 crore was also better than estimates of Rs 315 crore.
Though variable costs (energy and transportation costs) are expected to remain soft, ACC
aims to keep a tight control on fixed costs too. However, concerns on volume growth being hit by the pandemic continue, and hence realisations may soften.
With the peak construction season getting affected, analysts expect a recovery in construction services only in the December quarter.
For ACC, however, its cheap valuation should provide comfort. Analysts at Motilal Oswal
Financial Services say it is trading at a 35-55 per cent discount to peers such as Shree Cement, UltraTech and
Ramco Cements, and such a large valuation discount is excessive.
Having commissioned its capacity in East India, ACC
has arrested its market share losses since CY17, and should continue to grow in line with the market.
Further, expansions should also come on stream by the end of the year, and the proportion of inefficient capacities should decline.
The company has a strong balance sheet and is well placed to withstand any extended disruption, while falling costs may offset some impact on earnings due to the disruption, say analysts.
Target prices of Motilal Oswal, HDFC Securities, and Reliance Securities
range from Rs 1,310 and Rs 1,440, for the stock trading at Rs 1,207.