Mumbai: Shares of ACC Ltd surged as much as 13%, its biggest jump since September 2008, following better-than-expected June quarter earnings and positive outlook for 2018 cement demand. In intraday trade, ACC shares touched a high of ₹ 1,482.90 a share, up 13.6%—its maximum gains since 2 September 2008. At 10.19am, the stock was trading 13% up at ₹ 1475.85 on BSE.
Following ACC, shares of other cement companies also gained. India Cements Ltd advanced 10%, Ultratech Cement Ltd 6%, Shree Cement Ltd 3%, Grasim Industries Ltd 6%, Dalmia Bharat Ltd 8%, Ambuja Cements Ltd 8.6%. India’s benchmark Sensex Index rose 0.4% to 36,865.54 points.
ACC reported a profit of ₹ 325.50 crore for June quarter, up 1% from a year ago. The profit was higher than the ₹ 239 crore analyst estimated by Bloomberg. The volumes grew 7% to 7.24 million tonnes. Revenue rose 11% to ₹ 3848.20 crore, beating estimates of ₹ 3654 crore.
“The positive impacts of our step change in cost management are favourably impacting our financial results. We remain optimistic in our capacity to develop new revenue lines as well as strengthen our performance in both the cement and ready mix business", said Neeraj Akhoury, Managing Director & CEO in a release.
On outlook, the company said “the economic upswing in 2018 supported by buoyant consumption, a normal monsoon and uptick in rural demand is expected to benefit the construction sector. We expect cement demand to be positive, driven by the ‘Housing for All ‘ programme, sustained infrastructure spends and rural housing. ACC anticipates that cost pressures will remain, largely due to a rise in fuel costs as well other input material costs. ACC will continue to focus on improving efficiencies".
The company reported EBITDA of ₹ 540 crore, up 10% from a year ago led by higher than expected improvement in realisations by 5% quarter on quarter to ₹ 4,840 a tonnes and lower fuel costs.
Realisations benefited from higher growth in better realisation markets (i.e. Central and East), increased proportion of premium product sales, benefits from route optimisation and Plant & Geo-mix change for the company, said Antique Stock Broking in a note to its investors.
Brokerage firm Kotak Institutional Equities expects that ACC’s improved realisation likely reflects the change in geographical mix as well as higher sales of premium cement.
Many brokerages have upgraded the stock and increased its target price after its earnings. Motilal Oswal Securities have upgraded the stock to “buy" from “neutral", and raised its target price to ₹ 1633 from ₹ 1461 a share.
IDFC Securities upgraded the recommendation on ACC to “outperform" from “neutral". ICICI Securities have upgraded the stock to “buy" from “Add", and increased its target price to ₹ 1,610 from ₹ 1545 a share.
Of the analysts covering the stock, 22 have a “buy" rating, 11 have a “hold" rating, while eight have a “sell" rating, according to Bloomberg data.