ACC’s 4QCY08 net profit surpassed our estimate chiefly due to higher-than-estimated other income of Rs1.1 billion v/s an estimate of Rs0.5 billion. Last quarter other income contributed one third of PAT.
Revenue stepped up 6.6% y-o-y, in line with our estimate. Cement aggregate volumes rose 20.4% y-o-y (10.5% q-o-q) to 5.6m tonnes. At Rs3,368 a tonne, realizations fell 8.6% y-o-y and 2.4% q-o-q.
High volume growth arose mainly due to the low-base effect (a 5.5% y-o-y tapering in the year-ago quarter).
EBITDA per tonne, at Rs742, dropped 17.5% y-o-y and 1.7% q-o-q. Power and fuel costs per tonne jumped 9.1% y-o-y and dipped 2.9% q-o-q, to Rs799.
Only 35% of the coal ACC uses is through open-market purchases; hence, it is relatively less affected from volatility in prices of imported coal.
Expansion plans at Bargarh (1.3m tonnes), Wadi (3.4m tonnes) and Chanda (3m tonnes) are slightly lagging schedule and will come up in phases between June ’09 and June ’10. No sharp changes are expected in input costs. ACC expects cement demand in 2009 to be in the range of 6-8%.
We maintain our target at Rs410 and a SELL recommendation, based on an EV/EBITDA multiple of 5.5x CY09e.
At our target price, ACC would trade at a PE of 10x CY09e and an EV/tonne of $60, a discount of 40% to the current replacement cost.