ACC surges 7%, hits new high on strong operational performance in Q2

The company's Ebitda (earnings before interest, taxes, depreciation, and amortization) margins expanded 233 basis points (bps) quarter-on-quarter to 22.4 per cent due to higher realisations

Shares of ACC hit a new high of Rs 2,299 as they rallied 7 per cent on the BSE in intra-day trade on Tuesday after the company reported strong operational performance for the second quarter ended June 2021 (Q2CY21). The company’s Ebitda (earnings before interest, taxes, depreciation, and amortization) margins expanded 233 basis points (bps) quarter-on-quarter (QoQ) to 22.4 per cent due to higher realisations. On a year-on-year (YoY) basis, Ebitda margins improved by 200 bps from 20.8 per cent in Q1CY20.

The company’s net sales during the quarter increased 51 per cent YoY at Rs 3,810 crore over the previous year quarter. Ebitda during the quarter was up by 65 per cent YoY at Rs 869 crore. The profit after tax (PAT) more-than-doubled to Rs 569 crore from Rs 271 crore in the corresponding quarter of the previous year.

The management said that with a strong focus on supply chain efficiencies and cost optimisation, the company has emerged stronger and more resilient. Waste Heat Recovery System projects at various sites are progressing well. The large cement capacity expansion project at Ametha in Madhya Pradesh has commenced.

The management expects strong demand recovery. This would be led by the government’s focus on large-scale infra projects and affordable housing, coupled with a revival in industrial capex, driven by the implementation of the Production-Linked Incentive scheme, it said.

ACC trades at a 30-40 per cent valuation discount to peers Shree, UltraTech, and Ramco. We believe such a large discount is excessive as ACC has arrested its market share losses since CY17, the cost is expected to stay in check, aided by savings in logistic costs, and with planned expansions, the proportion of inefficient assets would decline, improving profitability, Motilal Oswal Securities said in a results update.

"Amid concern over higher cost pressure, the company managed to improve its margins during the quarter backed by higher realisations while sales volume broadly remained in line with our estimates. Overall, the performance has remained better than our estimates," ICICI Securities said in a note.