Buy This Mid Cap Cement Stock For 12% Potential Upside: HDFC Securities

HDFC Securities has a 'buy' call for ACC Ltd in its report published on July 15, 2022. The brokerage has estimated a target price of Rs 2,380/share for the stock of the company. Based on the brokerage's estimated target price and the stock's CMP, the company's shares have the potential to increase by nearly 12 per cent in the next 12 months or one year. ACC accelerated its Capex spend to Rs 10.85bn in H1CY22. It expects to commission 2.7/1mnMT clinker/cement capacities in Ametha, MP, in Q4CY22. The stock of the company maintained good returns over the years.

Stock Outlook & Performance 

On Friday, ACC Ltd's stock closed at Rs 2,140.35/share, it opened at Rs 2,160.30/share. Its 52-week low was recorded at Rs 1,900/share on March 07, 2022, and 52 week high was recorded at Rs 2,589/share on November 15, 202, respectively. On intraday, its low is Rs 2,111 and high is rs 2,159, respectively. 

The PE ratio is 23.69. The P/B ratio is 2.81. TTM EPS is Rs 90.35. ROE is 13.01%. It is a Midcap stock with a market capitalisation of Rs 40,193.05 crore. 

Stock Details
CMP	Rs 2,140.35
Target Price	Rs 2,380
Potential Upside	12.00%
Market Cap	Rs 40,193.05 Cr
ROE	13.01%

Its share in the past 1 week declined nearly 1.34 per cent. It gained a minor in the last 1 month, 0.83%. In the last 1 year, the shares moved up nearly 1.32 per cent, 34.21 per cent in the last 3 years and 21.95 per cent in the last 5 years, respectively.

1-Returns	3-Years	5-Years
1.32%	34.21%	21.9%5

Q2CY22 performance

On a low base, volume increased 11% YoY. NSR rose 3% QoQ due to better pricing gains in north and central markets. Opex shot up 9/20% QoQ/YoY on a spike in fuel and freight costs. Thus, unitary EBITDA fell 31/57% QoQ/YoY to Rs 540/MT. RMC revenue rose by 53% YoY on a 43% volume uptick. 

Expansion update and working capital

ACC accelerated its Capex spend to Rs 10.85bn in H1CY22. It expects to commission 2.7/1mnMT clinker/cement capacities in Ametha, MP, in Q4CY22. By H1CY23, it will commission another 2.2mn MT SGU in UP, thus increasing its cement capacity to 39mn MT in CY23. Post ongoing 39MW WHRS installations across Jamul, Kymore and Ametha, ACC's green power share will rise to 15%. Thereafter, it will add another 29MW at its Chanda and Wadi plants (order placed). By CY25, it expects to increase its WHRS capacity to 90MW, thus boosting its margin. ACC reported a negative OCF of INR 7.6bn in H1CY22 (vs Rs +4.2/ 24.1bn during H1/H2CY21) due to stretched working capital. Inventory/trade receivable amounts have jumped ~60/120% vs Dec-21. We have cut our CY22/23/24E EBITDA estimates by 11/6/5%, factoring in cost pressure in Q2CY22. 

Brokerage Suggests Buy For a Target Price of Rs 2,380/share

HDFC Securities said, "We maintain BUY on ACC, with a lower Target Price of Rs 2,380/share (12x its Mar-24E consolidated EBITDA). The upcoming expansions in the central market will boost its volume growth visibility from CY23 onwards. ACC is also increasing its green power mix and alternative fuel usage to mitigate the impact of rising fuel costs. In Q2CY22, while consolidated revenue rose 15% YoY (on a low base), EBITDA/APAT fell 51/61% YoY on sharp energy cost inflation. Working capital stretch led to ACC reporting a negative OCF of Rs 7.6bn in H1CY22 (vs Rs +4.2/ 24.1bn during H1/H2CY21)."

Company Overview- ACC Ltd.

ACC Limited (ACC) is a leading player in the Indian building materials space, with a pan-India operational and marketing presence. Synonymous with cement, we have established our reputation as a pioneer organisation that has consistently set new benchmarks with our innovative research and product development. With our experience and expertise spanning over eight decades, we have actively contributed to India's progress.

Disclaimer

The stock has been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.