ACC

ACC may be a good stock to accumulate on declines for investors looking at long-term returns. The stock’s PE multiple of seven, at a Price of Rs 501, factors in only moderate growth expectations. The company’s enterprise value per tonne is Rs 4,076 down from Rs 8,459 in December 2007.

Accelerated growth in despatches in the Northern region in recent months, easing cost pressures and a tighter supply situation as major capacity additions are rescheduled, suggest that ACC’s revenues and profits could see improvement from the December quarter of 2008.
Demand is strengthening

The stimulus measures announced by the government and a post-monsoon improvement in demand appear to have contributed to a pick-up in cement despatches in the Northern region in recent times. The region saw a 20 and 23 per cent growth in despatches in November and December respectively on a year-on-year basis, albeit on a lower base.

The other key region to see strong growth was the East, where despatches rose by 22 per cent in November and 10.3 per cent in December. ACC accounts for a lion’s share in these markets. Of the total 22.4 million tonne capacity, the company’s plants in North and East make up 14.36 million tonnes. In addition to these, ACC also has plants in New Wadi and Madukkarai in South and Chanda in West.

This lets the company draw benefits of strong prices in South as also strong demand in the North. The Gujarat government’s “Vibrant Gujarat” initiative that has drawn a reported Rs 12 lakh crore investment to the State could also see the demand for cement increasing in the region.

ACC is already working on its plan of adding a 3 mtpa capacity to its existing plant in Chanda (Maharashtra) by 2010. On commissioning, it will feed the infrastructure and other projects in the Western region.

ACC may be a good stock to accumulate on declines for investors looking at long-term returns. The stock’s PE multiple of seven, at a Price of Rs 501, factors in only moderate growth expectations. The company’s enterprise value per tonne is Rs 4,076 down from Rs 8,459 in December 2007.

Accelerated growth in despatches in the Northern region in recent months, easing cost pressures and a tighter supply situation as major capacity additions are rescheduled, suggest that ACC’s revenues and profits could see improvement from the December quarter of 2008.
Demand is strengthening

The stimulus measures announced by the government and a post-monsoon improvement in demand appear to have contributed to a pick-up in cement despatches in the Northern region in recent times. The region saw a 20 and 23 per cent growth in despatches in November and December respectively on a year-on-year basis, albeit on a lower base.

The other key region to see strong growth was the East, where despatches rose by 22 per cent in November and 10.3 per cent in December. ACC accounts for a lion’s share in these markets. Of the total 22.4 million tonne capacity, the company’s plants in North and East make up 14.36 million tonnes. In addition to these, ACC also has plants in New Wadi and Madukkarai in South and Chanda in West.

This lets the company draw benefits of strong prices in South as also strong demand in the North. The Gujarat government’s “Vibrant Gujarat” initiative that has drawn a reported Rs 12 lakh crore investment to the State could also see the demand for cement increasing in the region.

ACC is already working on its plan of adding a 3 mtpa capacity to its existing plant in Chanda (Maharashtra) by 2010. On commissioning, it will feed the infrastructure and other projects in the Western region.