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ACC Q1 Earnings: Low operating costs unlikely to sustain, says Edelweiss Securities

Updated : April 20, 2021 03:35:05 IST

Cement major ACC’s March quarter beat street estimates. The consolidated profit in the first quarter of CY21 rose 74.2 percent to Rs 563 crore from Rs 323 crore, YoY. Revenue during the quarter increased 22.7 percent to Rs 4,213 crore from to Rs 3,433 crore, YoY.

The company’s cement sales volume reported a growth of 21.5 percent at 7.97 million tonnes in Q1CY21 as compared to 6.56 million tonnes in Q1CY20. The strong performance was driven largely by a steep decline in operating costs.

Speaking in an interview with CNBC-TV18, Navin R Sahadeo, research analyst at Edelweiss Securities said, “The results are strong and it’s a good start to the result season for the cement sector. Yet, given the macro concerns around, it is unlikely to see any earning upgrade. Demand is a question amid the rising COVID-19 cases and there have been some slippages in prices.”

“However, in the current quarter, the surprise for ACC is not from the topline. It is more from costs wherein variable cost has sequentially declined and I do not think it’s sustainable given the fuel prices are, the variable cost is bound to come back and that is where I am not looking at any earnings upgrade,” said Sahadeo.

On stock valuation, he said, “There is valuation comfort, it trades 10 percent lower to its past 10 years average and significantly lower versus its peak, at least 30-40 percent lower to peak valuations and also lower to other cement stocks. Therefore, I would expect a positive outcome on the stock after the result but not something which should be positive for the sector.”

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