The performance of most cement companies, including ACC, is likely to be soft during the March 2013 quarter, which historically has been a strong one for the segment.
Analysts at Sharekhan expect earnings for the companies under their coverage to decline 13.8 per cent year-on-year (y-o-y) on a cumulative basis.
This, they believe, is due to sluggish demand and continued cost pressure.
However, the decline in ACC’s stock price has been much higher than peers, which some analysts look at as an opportunity.
Ravi Sodah at Elara Capital feels that after a fall of 20 per cent in three months, ACC is currently trading at a steep discount to UltraTech and its own replacement cost.
The current levels and valuation present a good entry point to long-term investors, he believes.
A similar opinion was given by analysts at Angel Broking, who also felt the huge valuation discount for ACC was unjustified.
They add ACC’s return on equity for calendar year 2012, of 19.3 per cent, was similar to UltraTech’s FY2013 estimated RoE (in spite of the superior ratio of operating earnings to tonne of UltraTech) and is expected to improve.
They expect ACC to post 8.9 per cent and 15 per cent growth in its top line and bottom line respectively, over CY2012-14.
The stock, at current market prices and based on trailing 12 months’ financials, is trading at enterprise value/Ebitda of $106 a tonne, much lower than replacement costs of $120 a tonne and more than $165
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