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UBS Maintains BUY on ACC and Grasim

May 6, 2007

UBS Investment research has maintained BUY recommendations on cement majors ACC and Grasim industries. However, UBS has revised the price target downwards to Rs 1,090 from Rs 1,225 for ACC and Rs 3,100 from Rs 3,300 for Grasim.

ACC:
ACC’s Q1FY07 revenue (Rs16.35bn), EBITDA (Rs5.07bn) and pre-ex PAT (Rs3.44bn) were significantly better than estimates – Rs15.9bn, Rs4.6bn and Rs3bn respectively. Entire difference in PAT from our estimate was due to higher EBITDA.

ACC is expected to report an EPS of Rs 76.45 and Rs 80.76 for FY08 and FY09.

Grasim Industries:
Grasim’s standalone Q4 pre-X PAT (Rs4.5bn) was in line with our estimate (Rs4.6bn), as were revenue and EBITDA. In FY07 consolidated earnings grew 89%, faster than standalone earnings growth of 78%, driven by 249% earnings growth at subsidiary, Ultratech.

Grasim is expected to report an EPS of Rs 252 and Rs 276 for FY08 and FY09 respectively.

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