"Until February 2020, Cement and Ready Mix Concrete volume benefitted from a healthy growth. Despite COVID-19 impacting operations in the month of March, we have delivered a double digit growth in EBITDA for the first Quarter of 2020 compared to same period last year," ACC Managing Director & CEO Sridhar Balakrishnan said. READ MORE
This growth has been supported by significant focus on premium products, increase in value added solutions in our Ready Mix business and results of cost reduction exercise in manufacturing and logistics, he said.
Analysts at Motilal Oswal Financial Services (MOFSL) note that ACC trades at 35-55 per cent discount to peers such as Shree Cement, UltraTech and Ramco. "We believe that such a large valuation discount is excessive as ACC has arrested its market share losses since CY17 and should continue to grow in line with the market. Secondly, its net cash balance sheet (22% of market cap) places it well to withstand any extended disruption from COVID-19, and thirdly, with its planned capacity expansions in CY22, the proportion of inefficient assets would decline and improve profitability."
As regards valuation, the brokerage values ACC at 8.5x CY21E EV/EBITDA (~35% discount to the past 5-year average of 12.7x) to arrive at a target price of Rs 1,370, which implies a target Enterprise Value per Tonne (EV/t) of USD 80 and target P/E of 20x on CY21. It has maintained "Buy" call on the stock.