4QCY2012 Result Update | Cement

February 11, 2013

ACC
Performance Highlights
Quarterly results (Standalone)
Y/E Dec. (` cr) Net sales Operating profit OPM (%) Reported Net profit
Source: Company, Angel Research

NEUTRAL
CMP Target Price
Investment Period
3QCY2012 % chg qoq 2,445 464 19.0 249 26.8 (14.3) (616)bp (3.8) 4QCY2011 2,503 442 17.7 470 % chg yoy 23.8 (9.9) (481)bp (49.1)

`1,261 -

4QCY2012 3,099 398 12.8 239

Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Cement 23,674 (1,804) 0.8 1515/1105 26,307 10 19,461 5,898 ACC.BO ACC@IN

ACCs 4QCY2012 net profit fell by 3.8% yoy to `239cr, and the same was below our estimate. Realizations for the company, although higher by 2.0% on a yoy basis, fell by 3.8% on a qoq basis. OPM at 12.8%, down 481bp on a yoy basis: ACC posted a 24% yoy growth in standalone top-line to `3,098cr. Adjusted for sales of the ready mix concrete (RMC) segment, which were included in the standalone sales (w.e.f 4QCY2012), the top-line growth for the quarter remained flat. Volume growth remained flat on a yoy basis. Even for CY2012, ACC posted a modest performance with volumes growing by a modest 1.6%. The overall OPM stood at 12.8%, down 481bp on a yoy basis, impacted by increase in freight costs and also due to low margins for the RMC business (which got included in standalone business during the quarter). Adjusting for the RMC business, we estimate the OPM for the company to be 14.8%. The adjusted profit after tax stood at `239cr, down 1.3% (4QCY2011 had tax reversal of `228cr) on a yoy basis. Outlook and valuation: We expect ACC to register a 13.4% yoy growth in its top-line over CY2011-13. The bottom-line is expected to post a CAGR of 3% over the same period. At current levels, the stock is trading at an EV/tonne of US$119 on CY2013E capacity, which we believe is fair. Hence, we continue to remain Neutral on the stock.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 50.3 10.2 20.4 19.1

Abs. (%) Sensex ACC

3m 4.4 (11.6)

1yr 9.9 (4.5)

3yr 20.7 46.0

Key financials (Standalone)

Y/E Dec. (` cr) Net sales % chg Adj. Net profit % chg OPM (%) FDEPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/tonne (US$)* Installed capacity (mtpa) EV/EBITDA (x) CY2010
7,717 (3.9) 1,120 (30.3) 23.5 59.6 21.2 3.7 17.9 19.9 2.6 155 27 11.2

CY2011
9,439 22.3 1,325 18.3 20.3 70.5 17.9 3.3 19.4 18.0 2.3 136 30 11.2

CY2012E
11,130 17.9 1,411 6.5 19.9 75.1 16.8 3.2 19.4 19.2 1.9 121 30 9.4

CY2013E
12,138 9.1 1,408 (0.3) 19.6 74.9 16.8 2.9 18.1 20.3 1.7 119 30 8.5

V Srinivasan
022-39357800 Ext 6831 v.srinivasan@angelbroking.com

Source: Company, Angel Research ;Note: *adjusted for CPP

Please refer to important disclosures at the end of this report

ACC | 4QCY2012 Result Update

Exhibit 1: 4QCY2012 performance (Standalone)

Y/E Dec. (` cr) Net Revenues Other Operating Income Total Operating Income Net Raw-Material Cost (% of Sales) Power & Fuel (% of Sales) Staff Costs (% of Sales) Freight & Forwarding (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM (%) Interest Depreciation Other Income PBT (ecl. Extr. items) Extr. Income/(Expense) PBT (incl. Extr. Items) Provision for Taxation (% of PBT) Reported PAT PATM (%) Source: Company, Angel Research 4QCY12 3,099 81 3,180 794 25.6 535 17.3 208 6.7 606 19.5 638 20.6 2,782 398 12.8 27 158 66 279 279 40 14.3 239 7.7 3QCY12 2,445 29 2,474 306 12.5 567 23.2 141 5.7 488 20.0 509 20.8 2,010 464 19.0 26 135 55 358 358 109 30.6 249 10.2 (3.8) (245)bp (22.0) (63.5) 38.4 (14.3) (616)bp 6 16.5 21.0 (22.0) 25.4 24.2 48.3 (5.5) % chg qoq 26.8 174.6 28.5 159.5 4QCY11 2,503 52 2,555 422 16.9 584 23.3 155 6.2 376 15.0 576 23.0 2,113 442 17.7 19 127 46 341.4 341 (129) (37.8) 470 18.8 (49.1) (1108)bp (18.2) (131.0) 31.6 (9.9) (481)bp 42.2 24.0 44.4 (18.2) 10.8 60.9 34.0 (8.3) % chg yoy 23.8 53.8 24.4 88.2 CY12 11,130 228 11,358 1,784 16.0 2,382 21.4 617 5.5 2,233 20.1 2,146 19.3 9,162 2,196 19.7 115 559 265 1,787 (335.3) 1,452 390 26.9 1,061 9.5 CY11 9,430 231 9,660 1,216 12.9 2,183 23.2 533 5.7 1,894 20.1 1,913 20.3 7,740 1,921 20.4 97 475 192 1,540 1,540 215 14.0 1,325 14.1 (19.9) (452)bp (5.8) 81.4 18.4 14.3 (64)bp 18.3 17.6 38.0 16.0 12.2 17.9 15.7 9.1 % chg yoy 18.0 (1.4) 17.6 46.8

Exhibit 2: Financial performance

3,500 3,000 2,500 (` cr) 2,000 1,500 1,000 500 0 2QCY11 3QCY11 4QCY11 1QCY12 2QCY12 3QCY12 4QCY12 Net Sales Source: Company, Angel Research Reported PAT OPM (RHS) 337 470 168 155 418 249 239 2,403 2,503 2,150 2,860 2,778 2,445 3,099 26 24 22 20 18 16 14 12 10 (%)

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ACC | 4QCY2012 Result Update

Exhibit 3: 4QCY2012 Actual vs Angel estimates

(` cr) Net sales Operating profit OPM (%) Net profit
Source: Company, Angel Research

Actual 3,099 398 12.8 239

Estimates 2,768 490 17.7 289

Variation (%) 12.0 (18.9) (488)bp (17.2)

Performance highlights
Robust top-line growth led by better realization
ACC posted a 24% yoy growth in its standalone top-line to `3,099cr. Adjusted for the sales of RMC segment, which were included in the standalone sales (w.e.f 4QCY2012) top-line growth for the quarter remained flat. Volumes for the quarter remained flat. Realizations for the company, although higher by 2.0% on a yoy basis, fell by 3.8% on a qoq basis.

Higher realization leads to OPM expansion

The overall OPM stood at 12.8% down 481bp on yoy basis, impacted by increase in freight costs and also due to low margins for the RMC business, which got included in the standalone business during the quarter. Adjusting for the RMC business, we estimate the OPM for the company to be at 14.8%. The adjusted profit after tax stood at `239cr down 1.3% on a yoy basis.

Per tonne analysis

During 4QCY2012, ACCs realization/tonne improved by 2.0% yoy to `4,531. Power & fuel cost/tonne fell by 10.5% yoy to `884. Even, on a q-o-q basis, the power & fuel cost/tonne fell by 16.3%. The freight cost/tonne increased by 11.2% yoy to `932. The operating profit/tonne stood at `661, down 10.4% yoy.

Exhibit 4: Operational performance

Parameter (`) Realization/tonne Net Raw-material cost /tonne Power and fuel cost /tonne Freight cost/tonne Other expenses/ tonne Operating profit/tonne
Source: Company, Angel Research

4QCY12 3QCY12 4QCY11 yoy chg (%) qoq chg (%) 4,531 913 884 932 1,074 661 4,708 688 1057 919 942 863 4,441 770 988 838 968 738 2.0 18.6 (10.5) 11.2 11.0 (10.4) (3.8) 32.6 (16.3) 1.4 14.0 (23.4)

February 11, 2013

ACC | 4QCY2012 Result Update

Investment rationale
Favorable capacity location to augur well for ACC
Around 51% of ACC's total capacity is located in states where either cement supply is less than demand or, if it is more, the excess can economically be supplied to nearby supply-deficit states. Hence, all its capacities can rationally achieve higher utilization. Its entire south India plant capacity is in Karnataka and Tamil Nadu, where the demand-supply dynamics are far better than that in Andhra Pradesh.

Higher fuel availability for CPPs leading to lower power and fuel costs
Going ahead, we expect power and fuel cost to be lower for the company, as it currently has 85% self sufficiency in its power requirement with a 361MW captive power plant (CPP), and access to the highest coal linkage in the industry along with few captive coal blocks.

Outlook and valuation

We expect ACC to register a 13.4% yoy growth in its top-line over CY2011-13E. The bottom-line is expected to post a CAGR of 3% for the same period. At current levels, the stock is trading at an EV/tonne of US$119 on CY2013E capacity, which we believe is fair. Hence, we continue to remain Neutral on the stock.

Exhibit 5: One-year forward EV/tonne

300,000 250,000 EV (` mn) 200,000 150,000 100,000 50,000 0 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12

EV/tonne Source: BSE, Company, Angel Research;

$100

$120

$140

$160

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ACC | 4QCY2012 Result Update

Exhibit 6: Recommendation summary

Company ACC* Ambuja Cements* India Cements JK Lakshmi Madras Cement Shree Cements Reco Neutral Neutral Neutral Neutral Neutral Neutral CMP (`) 1,261 189 83 135 236 4,411 1,910 Tgt. Price (`) Upside (%) FY2014E P/BV (x) 2.9 3.2 0.7 1.0 2.0 3.3 2.9 FY2014E P/E (x) 16.8 15.0 7.7 5.9 12.7 13.2 16.3 FY2012-14E EPS CAGR 3.1 24.3 5.5 37.3 7.3 35.9 14.5 FY2014E RoE (%) 18.1 20.7 9.0 17.7 16.9 28.4 19.5 EV/tonne^ US $ 126 163 63 54 89 150 191

UltraTech Cements Neutral

Source: Company, Angel Research; Note: *Y/E December; ^ Computed on TTM basis

Company Background
In 2005, ACC was acquired by the world's second largest cement company, Holcim. Currently, the Holcim Group in India (ACC and Ambuja Cements taken together) has the largest cement capacity in the country (57mtpa). ACC has a standalone total capacity of 30mtpa, with 16 cement plants spread across the country. Similar to UltraTech, the company is also a pan-India player but with a southern inclination (36% of its total capacity is in south as against 22% in north, 22% in east and northeast, 17% in central and 4% in west).

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ACC | 4QCY2012 Result Update

Profit & loss statement (Standalone)

Y/E Dec. (` cr) Total Operating Income % chg Total Expenditure Net Raw Materials Other Mfg costs Personnel Other EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) Adjusted PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg CY08 7,283 3.9 5,550 886 1,599 416 2,648 1,733 (9.6) 23.8 294 1,439 (10.8) 19.8 40 338 18.9 1,737 1.1 (49) 1,785 524 29.3 1,213 (1.0) 16.7 64.6 64.6 (1.1) CY09 8,191 12.5 5,547 956 1,540 368 2,684 2,644 52.6 32.9 342 2,302 60.0 28.7 84 77 3.3 2,294 32.1 2,294 688 30.0 1,607 32.5 20.0 85.5 85.5 32.4 CY10 7,976 (2.6) 6,163 1,168 1,599 462 2,935 1,812 (31.5) 23.5 393 1,420 (38.3) 18.4 57 98 6.7 1,461 (36.3) 1,461 341 23.4 1,120 (30.3) 14.5 59.6 59.6 (30.3) CY11 9,660 21.1 7,740 1,503 2,183 526 3,527 1,921 6.0 20.3 475 1,445 1.8 15.3 97 192 12.5 1,540 5.4 1,540 215 14.0 1,325 18.3 14.0 70.5 70.5 18.3 CY12E 11,358 17.6 9,148 1,784 2,382 617 4,364 2,210 15.1 19.9 559 1,652 14.3 14.8 115 265 18.1 1,802 17.0 335 1,466 390 26.6 1,411 6.5 12.7 75.1 75.1 6.5 CY13E 12,366 8.9 9,991 1,964 2,502 654 4,871 2,375 7.4 19.6 574 1,800 9.0 14.8 85 295 14.7 2,011 11.6 2,011 603 30.0 1,408 (0.3) 11.6 74.9 74.9 (0.3)

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ACC | 4QCY2012 Result Update

Balance sheet (Standalone)

Y/E Dec. (` cr) SOURCES OF FUNDS Equity Share Capital Reserves & Surplus Shareholders Funds Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Misc. Exp. not written off Total Assets 5,836 2,366 3,470 1,603 679 2,760 984 651 1,124 2,766 (6) 5,746 6,826 2,668 4,158 2,156 1,476 2,256 708 554 994 3,114 (858) 6,932 8,077 2,995 5,082 1,563 1,703 2,753 980 624 1,149 3,746 (993) 7,355 9,576 3,438 6,138 435 1,625 3,791 1,653 836 1,302 3,277 514 8,712 9,322 3,997 5,325 850 2,554 3,198 678 1,053 1,466 3,403 (206) 8,523 9,577 4,571 5,006 1,527 2,555 3,623 519 1,144 1,960 3,453 170 9,258 188 4,740 4,928 482 336 5,746 188 5,828 6,016 567 349 6,932 188 6,282 6,469 524 362 7,355 188 7,004 7,192 1,001 518 8,712 188 7,195 7,383 623 517 8,523 188 7,955 8,143 598 517 9,258 CY08 CY09 CY10 CY11 CY12E CY13E

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ACC | 4QCY2012 Result Update

Cash flow statement (Standalone)

Y/E Dec. (` cr) Profit before tax Depreciation Interest expense Change in Working Capital Less: Other income Direct taxes paid Cash Flow from Operations (Inc)/ Decin Fixed Assets (Inc)/ Dec in Investments Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances CY08 1,785 294 40 309 338 564 1,527 (1,325) 166 338 (822) 2 13 439 40 (464) 241 743 984 CY09 2,294 342 84 575 77 727 2,492 (1,544) (797) 77 (2,264) 85 505 84 (505) (276) 984 708 CY10 1,461 393 57 407 98 395 1,825 (657) (227) 98 (786) (43) 667 57 (767) 272 708 980 CY11 1,540 475 97 (703) 192 215 1,003 (371) 78 192 (102) 478 609 97 (229) 672 980 1,653 CY12E 1,466 559 115 (255) 265 390 1,230 (161) (929) 265 (825) (378) 618 383 (1,380) (974) 1,653 678 CY13E 2,011 574 85 (535) 295 603 1,236 (932) (1) 295 (638) (25) 647 85 (757) (159) 678 519

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ACC | 4QCY2012 Result Update

Key ratios
Y/E Dec. Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value DuPont Analysis (%) EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Int.) (0.2) (0.7) 36.0 (0.2) (0.5) 27.3 (0.3) (1.0) 25.0 (0.3) (1.0) 14.9 (0.3) (0.9) 14.4 (0.2) (0.9) 21.3 1.3 38 15 159 (40) 1.3 35 11 193 (57) 1.1 39 9 203 (81) 1.1 38 7 166 (59) 1.2 36 8 133 (33) 1.3 40 9 125 (18) 26.9 55.4 26.7 36.3 90.8 29.4 19.9 49.8 17.9 18.0 35.7 19.4 19.2 35.0 19.4 20.3 39.6 18.1 19.8 70.7 2.0 27.3 28.1 70.0 1.8 35.1 17.8 76.6 1.6 21.4 15.0 86.0 1.8 22.7 14.5 73.4 1.9 20.7 14.6 70.0 2.0 20.2 64.6 64.6 82.8 20.0 262.3 85.5 85.5 103.7 23.0 320.1 59.6 59.6 80.5 30.5 344.2 70.5 70.5 95.8 28.0 382.7 75.1 75.1 87.0 28.4 392.8 74.9 74.9 105.5 29.7 433.3 19.5 15.2 4.8 1.6 2.9 12.3 3.7 14.7 12.2 3.9 1.8 2.5 7.7 2.9 21.2 15.7 3.7 2.4 2.6 11.2 2.8 17.9 13.2 3.3 2.2 2.3 11.2 2.5 16.8 14.5 3.2 2.3 1.9 9.4 2.4 16.8 12.0 2.9 2.4 1.7 8.5 2.2 CY08 CY09 CY10 CY11 CY12E CY13E

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ACC | 4QCY2012 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

ACC No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

February 11, 2013

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