Sumeet Bagadia, Executive Director, Research at Choice Broking says tha ACC should be bought near Rs 1800 with a stop loss of Rs 1720 and target of Rs 1900 – Rs 1950. On a daily Chart, stock has been trading in Rising Wedge formation and tested the Upper Bollinger band formation which suggests that some correction can be seen for the near term. Furthermore, the stock has confirmed the Shooting Star candlestick pattern which is a reversal pattern suggesting downside in the counter. Moreover, the stock has been starting below 21 HMA which points out weakness in the counter. The daily momentum Indicator Stochastic, K% is trading below D% which is a negative sign for the prices. At Present level, Stock is having resistance at 1900 level while support comes at 1720. ACC share price today is Rs 1819.5, down Rs 8.5 or 0.5%.

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Jefferies maintains buy rating on ACC with a price target of Rs 2200. ACC's volume decline in last quarter is negative although commissioning of new capacity in the east implies this is only a short-term issue. A slight sequential decline in realisation along with continuing cost focus allowed the company to report a 30% YoY growth in EBITDA. There are too many exceptional items during the quarter but the operating performance is in line.

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ACC’s Negative operating leverage:

Reported unit cost rose 1% QoQ which is higher than forecast but adjusting for RMC ramp-up, was in-line. ACC’s unit costs were impacted by higher than-expected staff costs and other expenses, distributed over a declining volume base. Normalisation of expenses, pent-up maintenance spends, along with ramp up in RMC volumes would have resulted in higher overheads, in our view. Variable costs however saw a declining trend. Unit freight cost declined 3% QoQ, while manufacturing cost (material + power & fuel) was up just by 1% sequentially despite steep fuel price inflation, a positive.

ACC’s Volume decline:

Market share losses continued for ACC as volumes declined 1% YoY to 7.7mt, which is 3% below Jefferies estimate. A volume decline, in the context of the strong growth reported by peers, is disappointing. RMC witnessed sequential stabilisation, up 60% QoQ although YoY pressures remained, -20% YoY decline.

ACC’s In-line EBITDA:

ACC Unit EBITDA rose 30% YoY (-12% QoQ) to around Rs900/t, in line with Jefferies estimates. A ramp-up in RMC business also contributed to the margin recovery YoY. Overall EBITDA (adjusting for one-off) is up 30% YoY to Rs 7 bn which is in line with forecasts. Pre-ex PBT is up 42% YoY to Rs 5.8 bn.

Exceptional items in ACC’s results:

The quarter has a few exceptional items viz.:

a)      Rs 1.8 bn impairment with respect to Madukkarai unit assets
b)      reversal of incentive income in other expenses worth Rs 1.3 bn
c)       tax writebacks due to migration to the new regime at Rs 2.5 bn.

ACC’s Management commentary:

Outlook is fairly positive as economic recovery is underway led by government focus on infra, particularly roads, railways, affordable housing etc. as announced in the union budget.