Cement firm ACC will release its financial results for the third quarter ended September 30 on Tuesday. The stock price has corrected nearly around 25 percent from the peak seen earlier this year. In terms of numbers, revenue growth is expected to come around 3 percent. Analysts expect higher realisations but sales volumes numbers are likely to decline.

A CNBC-TV18 poll threw up a number of around 6.4 million tonnes, which would mean a contraction of around 2.5 percent odd.

ACC has pan India presence, which is a good thing but on a sequential basis, prices are down by around 4 percent. Though on a year-on-year (YoY) basis, they will rise as prices were up by around 5-6 percent odd y-o-y.

ACC has exposure to south India and east India. So on a sequential basis, prices out there had corrected. So they will bear the brunt of lower realisations, particularly on a sequential basis.

In terms of profitability, the operating profit may see growth of around 14 percent. Margins should expand by around 150-200 basis points (bps) or thereabouts on the back of higher realisations. The unfortunate part is that the volumes will be lower. So there will be no operating leverage that will play out.

Input costs have cooled down which should be good news for margins but bulk of that benefit is likely to come in the next quarter because the company will be sitting on some high-cost inventory.

The net profit growth is expected at around 32-35 percent.

ACC EARNINGS ESTIMATE

Q3CY19 (YoY)

-Revenue From Ops seen (GU)3 percent at Rs 3,535 crore vs Rs 3,433 crore

-Sales Volumes seen (RD)2.3 percent at 6.4 mt vs 6.55 mt

Q3CY19: Realisations

-Pan-India price down 4 percent QoQ but was up 6 percent YoY

-Most impacted due to exposure to Southern and Eastern regions

-Price correction was bigger in Southern and Eastern India

-Operating Profit seen (GU)14 percent at Rs 508 crore vs Rs 443.7 crore

-Margins seen (GU) at 14.4 percent vs 12.9 percent

Q3: Factors Impacting Margins

-Higher realisations YoY

-No benefit of operating leverage

-Weak realisations partly offset by lower costs sequentially

-Higher maintenance and soft realisation to impact margins sequentially

-Net Profit seen (GU)36 percent at Rs 285 crore vs Rs 209 crore