ACC rallies 5% post strong Q2 earnings; brokerages see up to 39% upside

EBITDA per tonne increased sharply by 26 percent to Rs 1,089 per tonne in Q2 and the same on a sequential basis jumped 54 percent.

Shares of cement major ACC rallied 5 percent intraday on July 19 after reporting better-than-expected earnings for the quarter ended June 2019. Most brokerage houses remained bullish on the stock and expect the stock to return more than 30 percent.


The stock was one of the biggest gainers among large-caps in last one year, rising 25 percent. It was trading at Rs 1,621.30, up 3.45 percent on the BSE at 0956 hours.

The cement maker reported a solid 39 percent year-on-year growth in June quarter profit at Rs 456 crore and 7.8 percent growth in revenue from operations at Rs 4,152 crore.

Sales volumes declined 0.6 percent at 7.20 million tonnes but still managed to exceed CNBC-TV18 poll estimates of 7 million tonnes.

At the operating level, earnings before interest, tax, depreciation, and amortization (EBITDA) increased 25 percent to Rs 784 crore and margin expanded 264 bps to 18.89 percent in Q2.

The company follows January-December as a financial year.

According to a CNBC-TV18 poll estimates, profit was likely to be at Rs 385 crore on revenue of Rs 3,905 crore.

EBITDA per tonne increased sharply by 26 percent to Rs 1,089 per tonne in Q2 and the same on a sequential basis jumped 54 percent.

Here is what brokerages say about ACC earnings:

CLSA | Rating: Buy | Target: Rs 2,050 | Return: 31%

CLSA maintained buy call on the stock and increased price target to Rs 2,050 from Rs 2,000 earlier after EBITDA expanded to an 8-year high & in four digits in Q2.

The global brokerage raised its EPS forecasts by 3-4 percent. "Cement pricing, a key stock price driver, needs to be monitored," it said.

Citi | Rating: Buy | Target: Rs 2,175 | Return: 39%

Global brokerage house Citi maintained its buy call on the stock with a target price at Rs 2,175 per share as second-quarter earnings beat its expectations with EBITDA per tonne coming a 7-year high, though volumes & pricing partly offset by higher costs.

According to the investment firm, a near-term pullback on volumes & pricing may be temporary.

Nomura | Rating: Neutral | Target: Rs 1,750 | Return: 12%

The Japanese brokerage firm retained its neutral rating on the stock with a target price at Rs 1,750 as it feels more price cuts/discounts are likely with demand being weak.

The realization will decline over the next 4-5 months, though Q2 results were significantly ahead of consensus, it said.

"We continue to believe the cement sector is in an upcycle," it added.

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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