ACC falls 5% to Rs 1,578 on lower-than-expected Q1 operating performance

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ACC shares dipped 5 per cent to Rs 1,578 on the National Stock Exchange (NSE) in the early morning trade on Wednesday after the company reported a lower-than-expected operating performance in the quarter ended March, 2019 or Q1CY19.

The company’s operating Ebitda (earnings before interest, tax, depreciation and amortization) grew 9 per cent year on year (YoY) at Rs 462 crore, againt analysts' expectation of Rs 639 crore, in Q1CY19. The low growth could be attributed to lower-than-expected improvement in realisation and absence of savings towards power & fuel and freight cost.

Ebitda margin remained flat at 13.8 per cent in Q1CY19, as against the corresponding quarter of previous year.

Net sales during the quarter went up 8 per cent to Rs 3,850 crore as compared to Rs 3,557 crore for the same quarter last year. The company’s consolidated profit after tax also rose 38 per cent YoY at Rs 346 crore, which includes one-time income of Rs 99 crore due to reversal of provisioning of income-tax interest.

"The prices of fuel and slag rose in the quarter, which was mitigated by market initiatives, sustained cost reduction initiatives viz. material source-mix and fuel mix optimization and productivity improvement measures," ACC said in a statement, adding that"Plant capacity utilization improved during the quarter".

The stock had witnessed a strong run-up in the past two months, outperforming the market by surging 20 per cent as compared to a 7.5 per cent rise in the benchmark S&P BSE Sensex, till Tuesday.

“ACC reported lower than expected Q1CY19 operating performance with EBITDA/t at around Rs 710 versus estimate of Rs 810 primarily owing to miss in revenue realization, higher freight costs and no meaningful savings of P&F cost either,” analysts at Antique Stock Broking said in its result review.

Prior to the results the firm was anticipating major upgrade in the earnings. However, the miss in Q1 performance has dampened expectation of any meaningful upgrades in estimates, the brokerage firm said.

"With the recent rally in the stock price, we see limited upside from here and thus downgrade the rating to Hold," it said.

A lower-than-estimated revenue realisation (due to higher sales volume in Eastern region) and higher freight and power and fuel cost resulted in soft operating performance, analysts at Reliance Securities said in result update.

The brokerage firm maintained its positive stance on ACC owing to its strong penetration in rural markets (around 80 per cent trade segment volume) and consistent focus on premium products. Looking ahead, it expects ACC’s operating performance to improve led by recent up-tick in realisation in its core markets.

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