ACC shares retreat as sharp decline in net profit disappoints Dalal Street

ACC shares retreat as sharp decline in net profit disappoints Dalal Street

Shares of ACC Ltd sharply declined on Friday after the cement maker posted a 60.07% decline in its consolidated net profit to Rs 227.35 crore for the quarter ended June 30, 2022. The stock fell 0.73% on the BSE to Rs 2,140.70 while it declined 0.85% to Rs 2,142 on the NSE.

The company, which follows the January-December financial year, had posted a profit of Rs 569.45 crore for the June quarter a year ago. The bottom line was impacted because of a steep rise in prices of pet coke and imported coal. As ACC is well-positioned in its key markets with better pricing and volume growth, the long-term outlook is intact amid near-term energy cost headwinds.

Broking firm Goldman Sachs has kept the ‘neutral’ rating on the stock with a target of Rs 2,100. The impact of rising fuel prices has likely peaked. However, elevated competition in east and major capacity expansions are still 9-12 months away, it said.

According to Axis Securities, ACC’s capacity expansion plans are progressing well and the company is well-poised to capitalize on the growth momentum by tapping its upcoming and expanded capacity in demand-accretive central India. This will also aid the company gain market share which it lost to larger peers over the years. “We value ACC at 11x its CY23E EV/EBITDA, factoring in the higher cost and await margins to improve to arrive at a target price of Rs 2,010, implying a downside of 7% from the CMP and hence change its rating from ‘buy’ to ‘hold’.” Citi maintains ‘buy’ on ACC with a target price of Rs 2,460. The brokerage house said valuations with upsides from potential synergies make it an attractive bottom-up play.

UBS has a ‘buy’ call on the company with a target price of Rs 2,600. The brokerage has noted that the open offer at Rs 2,200 per share could keep the downside protected, and market would keep track of the acquisition by Adani Group.

CLSA maintains the ‘underperform’ rating with a target price of Rs 2,300. CLSA said clarity on earnings is the key for re-rating of the stock.