汇丰银行-印度水泥产业-india cement upgrade acc to buy on record volumes and massive beat；upgrade acem to hold-20170718-hsbc

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1、18July2017IndiaCementEQUITIESMATERIALSUpgradeACCtoBuyonrecordvolumesandmassivebeat;upgradeACEMtoHoldIndiaACCreportedrecordvolumesandsharpimprovementinRajeshLachhani*margins–amassivebeatofconsensusestimatesAnalyst,Metals&Mining,MaterialsHSBCSecuritiesandCapitalMarkets(India)

2、PrivateLimitedrajeshvlachhani@hsbc.co.inImprovingcostefficiency,strongvolumesandhigher+912261640687realisationscouldresultin860bpmarginexpansionby2018e*Employedbyanon-USaffiliateofHSBCSecurities(USA)Inc,andisnotregistered/qualifiedpursuanttoFINRAregulationsUpgradeACCtoBuy(TP:I

3、NR1,900fromINR1,680)andACEMtoHold(TP:INR252fromINR214)onhigherearningsRecordvolumesandhigherrealisationsresultsinstrongearningssurprise:ACCreportedstrongvolumesof6.74mt(up+10%y-y),higherthanconsensusexpectationof6.3mt,aidedbyincreasedvolumesfromJamulandSindriandbenignbase.RMCvol

4、umeof0.67mcubicmetreswasup6%y-y,continuingitspositivetrend.Volumegrowthwascommendablegivenourexpectationof4-5%growthfortheindustryin2QCY17.WeexpectACC’svolumegrowthtobethehighestinourcoverageuniverse.2QCY17EBITDAofINR6.4bnwasupsharplyby38%y-y,beatingStreetexpectationsofINR5.2bn,

5、helpedbyhighervolumesandrealisations(up10%y-y).EBITDA/tofINR943wasthehighestinthelast5years.Whilethecost/twasstablesequentially,ACCreported6%y-yincreaseduetohigherpowerandfuelandfreightcost,partiallyoffsetbylowerrawmaterialcosts.UpgradingACCtoBuyandACEMtoHold:Wehadcautiouslyupgr

6、adedourratingofACCinthepreviousquarter(Movingintherightdirection)aswewantedtoascertainthesustainabilityofthecompany’sstrongperformance.Takingnoteofanotherimpressivequartergivesusmoreconfidenceforasustainablystrongerperformance.WehavethereforeincreasedourEBITDAestimateforACCbetwe

7、en2017-2019eby4-6%andnowratethestockBuy(fromHold).WearealsoupgradingACEMtoHold(fromReduce)onthebackofourACCupgrade(ACEMhasa50%stakeinACC)andourexpectationofhigherearnings(increasedACEMEBITDAby5-7%between2017-19e),giventhesharppricinghiketakenintheWestandEastregionwhereACEMhas55%

8、exposure(Earstotheground).WeraiseourTPforACCtoI