ACC Q2 results impact: Stock drops 2% after weak numbers; should you buy?

Shares of ACC declined around two per cent in Friday's intraday trade after the cement maker posted weak earnings in the quarter ended June'22. ACC Ltd on Thursday reported a 60.07% decline in consolidated net profit at Rs 227.35 crore in the second quarter ended June 30, 2022, against Rs Rs 569.45 crore in April-June a year ago.  

Total revenue of ACC, which follows January-December financial year, stood at Rs 4,468.42 crore as against Rs 3,884.94 crore in the year-ago period. However, total expenses rose to Rs 4,221.74 crore against Rs 3,175.47 crore in the same quarter a year ago.  

Meanwhile, reacting to weak numbers, brokerage houses have downgraded ratings of the cement stock and slashed target prices of ACC on the back of q2 earnings posted by the company in April-June quarter.  

Global brokerage firms CITI and Jefferies though maintained a 'buy' on the counter, but reduced their respective target prices. CITI slashed its target price from Rs 2720 to Rs 2460, while Jefferies brought down the target to Rs 2565 from Rs 2659.  

JP Morgan, Goldman Sachs and Credit Suisse maintained a neutral rating, however, they also resorted to target cuts. JP Morgan slashed the target price from Rs 2325 to Rs 2160. Goldman Sachs and Credit Suisse new target prices were Rs 2100 and Rs 2000respectively.  

Morgan Stanely maintained an underweight rating with unchanged target price of Rs 2050.  

Domestic brokerage Motilal Oswal, which expected similar results, said ACC’s 2QCY22 result was weak as expected, though, the company met with our muted expectations.  

It believes at current levels, ACC leaves little room for an upside. It downgraded the stock with neutral rating for target price of Rs 2,260, an upside of five per cent on its previous closing.  

Saying 'results are in line with what we expected but it is a miss to street estimates', brokerage firm Phillip Capital maintained a buy for a target price of Rs 2600. On Thursday's closing it is 20% upside.  

We were among the lowest on street estimates. We were c.33% lower than consensus*. Absolute EBITDA at Rs3.5bn is 4%/31% better/lower vs. Us/consensus. To our estimates, volumes were 1% better; realisations 6% better but opex/tonne too, was 6% higher. Resultantly, EBITDA/tonne at Rs464 was almost in-line to our estimate at Rs 453 Vs Consensus (based on our volume estimates) realisations is 7% lower; opex/tonne 3% higher and blended EBITDA/tonne 31% lower," the brokerage added.  

At around 10.30 am, shares of ACC were trading with over half per cent cut to Rs 2145.05 per share on the BSE. One-year chart pattern of the cement stock shows that the stock has largely traded flat and gave negligible return of around two per cent as on July 15.