Cement maker ACC beat street estimates, posting a 20.26 percent rise in its net profit at Rs 363 crore for the September quarter (Q3). The company follows a January-December financial year.
The firm had reported a net profit of Rs 302.56 crore in the corresponding quarter of the previous financial year. Revenue during the quarter increased marginally to Rs 3,537.3 crore from Rs 3,528.31 crore, YoY.
EBITDA in the September quarter also rose 20.5 percent to Rs 671.4 crore from Rs 557.1 crore while EBITDA margin expanded by 320 bps to 19 percent from 15.8 percent, year on year.
Brokerage houses are very bullish post the results with most raising their target prices for the stock while maintaining a positive view. Here's what brokerages said:
maintained a 'buy' call on the stock and has raised its target to Rs 1,920 per share from Rs 1,730 earlier. It added that ACC’s better cost control for the third consecutive quarter implies that the benefits of steps taken may be sustainable and may drive efficiencies.
Citi also raised the target price to Rs 2,075 per share from Rs 1,950 earlier while maintaining a 'buy' call. The company is Citi's top pick in the cement space with UltraTech Cement. It added that the volume trajectory is looking upwards and expects a price hike post the festive season in November.
Jefferies, meanwhile, increased the target to Rs 2,200 from Rs 1,900 earlier and remained bullish on the stock. Cost efficiency remains a theme for ACC, the brokerage believes this makes the cement major an exciting story.
"Outlook is fairly positive as economic recovery is underway led by the government's focus on infra, increased rural spending and a greater focus on affordable housing. The management focus is on 'Health, Cost, and Cash' given the tough macro," it added.
Post the earnings, Sridhar Balakrishnan, Managing Director & CEO, ACC said that despite COVID-19 headwinds, the Indian economy is witnessing early signs of recovery.
"At ACC, this recovery has been reflected in our Q3 results, where our volumes and sales have bounced back to prior-year levels. Our efficiency and cost-reduction plans have helped drive significant margin expansion during the quarter. We continue to manage working capital effectively resulting in healthy cash flow delivery," he added.
The company expects the government's thrust on infrastructure development, increased spending through measures aimed at reviving the rural economy and a sharper focus on the affordable housing segment to drive a strong resurgence of cement demand and bring growth opportunities for the cement sector going forward.