X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
ACC: Will it outperform? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 20, 2004

    ACC: Will it outperform?

    As compared to the market leader, Gujarat Ambuja, ACC has under performed in the stock market over the last one year. We take a review of the company's performance in the recent quarter and whether the much expected 'faster margin expansion' is likely to happen in FY05 and beyond.

    On a consolidated basis, ACC accounted for almost 12% of industry capacity in FY04 and an estimated 14% of industry production. It is particularly strong in the northern and the eastern regions with a capacity share of 16% and 8% respectively in the said regions. Though the company's benefits from a well-spread presence, its operating margins have been below its peers (especially Gujarat Ambuja). Given its large capacity and regional diversification, during periods when cement prices are rising, it is expected that ACC's margins will rise at a faster rate than its peers. But it has not been the case on a consistent basis.

    Now that the average cement prices are expected to increase by around 5% to 6% in FY05 and the restructuring process is reaching its final phase, what does the future hold for ACC?

    On the demand side, fueled by an outlay of Rs 400 bn on infrastructure projects and housing sector finance, the cement industry is expected to achieve an annual growth rate of 8.0% to 10.0% in the next 2 to 3 years. While growth in the medium-term is likely to arise primarily from housing sector growth, in the long-term, demand for cement from infrastructure spending will gather pace. As a leading player, we expect ACC to outpace industry growth rate in the next two to three years. As a matter of fact, there is a clear visibility on the demand side for the cement sector as a whole and the company in particular.

    At the same time, we do not expect operating margins of the company to outpace its peers purely because of unfavorable demand-supply situation in the southern market. It is estimated that there is excess supply in the southern market to the tune of 40%. Compared to the western and northern markets, the demand-supply imbalance is unlikely to turn favorable in the next two to three years.

    Though benefits of setting up of captive power facilities in select southern plants will be reflected in ACC's margins in FY05, the modernisation of the Chaibasa plant will reflect in operating margins in FY06. The company is setting up a 15 MW captive power plant in Chaibasa. This along with the modernisation programme will cost Rs 2.9 bn. Keeping in mind the sharp rise in fuel cost and increase in transportation charges in the recent past, we expect operating margins to expand only marginally in FY05. As a matter of fact, margins of Gujarat Ambuja and Grasim will continue to remain superior.

    The stock currently trades at Rs 273 implying a price to earnings multiple of 26 times our expected FY05 earnings. Though the balance sheet of the company looks much healthier after the FCCB issue and there exists the scope of margin expansion beyond FY05, valuations are on the higher side on a relative basis and therefore, the under performance of the stock is not a surprise.

     

     

    Equitymaster requests your view! Post a comment on "ACC: Will it outperform?". Click here!

      
     

    More Views on News

    ACC: Cementing Growth through Capacity Expansion and Favorable Sectoral Developments (Quarterly Results Update - Detailed)

    Jul 20, 2017

    Expanded capacity helped ACC strengthen its market presence in eastern region during the quarter ended June 2017.

    ACC: Jan-March Quarter Sales up 9% YoY, Margins Dip (Quarterly Results Update - Detailed)

    May 4, 2017

    Expanded capacity results in topline growth during the quarter ended March 2017.

    ACC: Demonetisation Takes Toll on Volumes (Quarterly Results Update - Detailed)

    Feb 20, 2017

    Demonetisation hits cement demand during the quarter ended December 2016.

    UltraTech: Post-Acquisition Cement Capacity Augmented to 93 MTPA (Quarterly Results Update - Detailed)

    Aug 11, 2017

    UltraTech Cement completed the acquisition of cement plants of Jaiprakash Associates Limited (JAL) and Jaypee Cement Corporation Limited (JCCL) during the quarter ended June 2017.

    Ambuja Cement: Fall in Other Income Drag Bottomline Lower (Quarterly Results Update - Detailed)

    Aug 11, 2017

    While topline witnessed growth on the back of higher cement sale volumes, a 50.5% YoY fall in other income weighed on Ambuja's bottomline during the quarter ending June 2017.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    ACC LTD SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK ACC LTD

    • Track your investment in ACC LTD with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    ACC LTD 8-QTR ANALYSIS

    Detailed Quarterly Results With Charts

    COMPARE ACC LTD WITH

    MARKET STATS