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ACC Estimates Equity report

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Accounting

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ACC Estimates Equity report
Long Term BUY: 37% Upside (Period-3 years)
Rating
ACC Limited is India’s leading manufacturer of cement with a Pan India network of
factories and marketing offices. Cements and blended cements is marketed through
a network of 19 Sales Units, 54 Area Offices, and 194 warehouses. This is backed
by a countrywide network of over 9,000 dealer who, in turn, are assisted by their
sub-dealers. ACC’s marketing; sales and distribution processes are industry
standards. At current levels of Rs 1107, ACC is trading at 12.07x its CY10E and
7.16x its CY12E. On EV/EBIDTA ACC is trading at 1.9x it FY10E and 1.54x its
CY12E. Hence we recommend a buy on 3 year horizon.
2010
Rating Matrix BUY INR 1107 INR 1146 3.52% 1 year INR 1518 37% 3 years CMP
Target Price Potential Upside Period Target Price Potential Upside Period
Cement Industry Scenario – 2009:
Valuation Summary FY09A EPS(Rs) 83.21 PE 13.30 Target PE 14 EV(Cr. Rs) 5682
EV/PAT 3.63 EV/Revenue 0.65 EV/EBDITA 2.10 RoNW (%) 18 RoCE (%) 34.93
FY10 E 91.71 12.07 14 6355 3.69 0.82 1.90 22.7 32.48 FY12 E 154.67 7.16 14 7999
2.75 0.52 1.54 22.8 32.94
At the start of the year Indian economy was in a recession. The cement industry
players had done substantial capacity addition but the demand prospects were not
good. Contrary to the expectation there was strong demand, leading cement plants
to achieve high capacity utilization and prices stayed stable. Also what favoured the
industry was dip in commodity prices including fuel.
The cement industry registered a steady growth of 10.3% during the year under
review. Overall cement despatches in

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2009 were approximately 195 million tonnes, up from 177 million tonnes in 2008.
Growth was seen across all regions, led by rapid developments in infrastructure and
a stable housing sector. The demandsupply balance was maintained with scenario
was generally with high levels of capacity utilization in most of the regions. In 2009,
capacity additions of 26.88 million tonnes went into materialization. The new capacity
added didn’t yield results immediately hence prices remained stable.
Analysis by: Chetan and Venkati,PGDM(2009-11)
Page 1
ACC :2010 Estimates
2010
Key Pointers: Net Sales: The net sales increased by 9.84% (7720Cr to 8480Cr)
during current year over previous year mainly due to higher cement realization.
Cement volumes increased by 2.56% during the current year. Raw Materials: The
raw materials consumption of the Company increased by 11.56 % (1107Cr to
1235Cr) over the previous year mainly due to higher prices of Gypsum and Slag
consumed. Power and Fuel: The power and fuel cost reduced by 4% (1594Cr to
1530r). There is increase in the price of indigenous coal and imported coal but cost
of Power and Fuel consumption has decreased as compared to previous year on
account of optimization of coal mix and lesser consumption of coal per unit of power.
Interest Charges: The interest charges increased by 110% (40Cr to 84Cr).The
Company has raised Rs. 500 Crore (Rs. 200 Crore in the previous year in the month
of Dec 08) through private placement of secured non-convertible debenture. The
interest charges on debentures have been capitalised of Rs. 26.38 Crore as
compared to Rs. 1.36 Crore in the previous year. Further during the current year, in
the month of December 09 the Company has repaid the rupee Term loan of Rs. 200

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Crore. Net Fixed Assets: Net Fixed Assets increased by 21.61%(3600Cr to 4378Cr)
as compared to previous year mainly due to commissioning of major portion of
Bargarh expansion / modernization project along with captive power plant with an
incremental capacity of 1.1 MTPA and grinding plants at Kudithini and Thondebhavi
with capacity of 1.1 MTPA and 1.6 MTPA respectively
Key Financials(Cr Rs) FY09A FY10E FY12E Sales EBDITA EBDITA(%) PAT
EPS(Rs) 8725 2708 31.04 1564 83.21 10041 3336 33.22 1724 91.71 13253 5210
39.31 2907 154.67
Analysis by: Chetan and Venkati,PGDM(2009-11)
Page 2
ACC :2010 Estimates
Loan Funds:
2010
Loan funds increased by 17.63%(482Cr to 567Cr).There is increase in secured loans
primarily on account of issuance of Rs. 300 Crore secured non-convertible
debentures in the month of October 2009. During the current year, rupee term loan
of Rs. 200 Crore has been repaid in the month of December 2009. During the
current year, unsecured Loans have been decreased on account of repayment of
loan taken from KRDCL.
Stock Data BSE NSE Industry M.Cap(Rs.Lakhs) Equity(Rs.Lakhs) Face Value(Rs)
52 week H/L Promoters Stake (%) FII Stake (%) MF Stake (%) Bodies Corporate
(%)
Particulars Revenue EBITDA Net Profit EPS P/E ROE EV/EBITDA EV/Tonne CY09A
8725 2708 1564 83.21 13.3 26.7 2.1 2168 CY10E 10041 3336 1724 91.71 12.07

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