7 March 2019
Annual Report Update | Sector: Cement
: INR 1,853 (+19
Profitability improves despite cost pressure
Increase in working capital impacts cash flow…
We have analyzed ACC’s CY18 annual report and the following are the key takeaways:
East, Central and North regions expected to drive demand over FY18-20E
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
291.4 / 4.2
1676 / 1255
As per the management, India’s total cement capacity stood at 502mt in
CY18 and is expected to reach 550mt by CY20. The cement sector recorded a
growth of ~8.5% during 2018 as compared to ~6% in 2017.
The company expects the East, Central and North regions to drive the
demand, going forward.
As per Indian Brand Equity Foundation (IBEF), in FY 2019, the demand for
cement is likely to grow by 7-8%, led by affordable housing, rural Individual
Home Builders (IHBs) and infrastructure-led activities.
Financials Snapshot (INR b)
2018 2019E 2020E
148.0 164.7 178.1
21.2 25.7 29.9
10.8 14.7 17.9
57.3 78.4 95.3
EPS Gr. (%)
22.1 36.9 21.6
560.0 621.5 699.9
10.8 13.3 14.4
11.8 13.1 14.2
27.2 19.8 16.3
Shareholding pattern (%)
Dec-18 Sep-18 Dec-17
FII Includes depository receipts
Stock Performance (1-year)
Sensex - Rebased
Cost pressure arising from higher raw material and fuel prices partly
mitigated by improved efficiency
ACC’s raw material cost was impacted by higher slag prices. Its sustained
efforts to improve flyash absorption enabled the company to reduce the
clinker factor by producing a higher share of blended cement that helped
mitigate the increase in slag prices. The increase in petcoke and coal prices
was mitigated by fuel mix optimization and the use of WHRS. ACC’s freight
cost was impacted by higher FOR sales and a rise in diesel prices, the effects
of which were partly mitigated by route optimization.
During the year, ACC made efforts to reduce the impact of rising electrical
energy cost by partly replacing grid power through the consumption of Open
Access (OA) power from comparatively cheaper sources, resulting in savings
of INR 168m in power cost.
Despite the increase in costs, the company’s EBITDA/t increased by 4% YoY
to INR 745, led by better realization. ACC focused on the sale of premium
products which increased by 36% YoY. Retail constituted 80% of the
RMC delivers healthy results
ACC’s RMC business has been consistently performing well. Its RMC sales
volume & EBITDA rose by 16% in 2018 as compared to the previous year.
During the year, the RMC business expanded its footprint by adding 18 new
plants in high contribution and high EBITDA margin markets across the
country. With this addition, the company’s nation-wide network of RMC
plants now comprises 75 state-of-the-art units.
Pradnya Ganar – Research Analyst
(Pradnya.Ganar@motilaloswal.com);+91 22 6129 1537
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.