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ACC Limited (formerly The Associated Cement Companies Limited) is the largest producer of cement in India. Cement is extremely essential for construction and real estate industry. ACC has 14 modern cement plants and 19 ready mix concrete factories spread throughout India. ACC’s plants have a total installed capacity of about 19 million tonnes per year. The company has lot of expertise in the cement industry since it has been in operation for the last 70 years.
Brief History:
In 1936 ten cement companies belonging to Tatas, Khataus, Killick Nixon and F E Dinshaw groups merged to form a single entity, The Associated Cement Companies. Sir Nowroji B Saklatvala was the first chairman of ACC. The first board of directors had some prominent industrialists - J R D Tata, Ambalal Sarabhai, Walchand Hirachand, Dharamsey Khatau, Sir Akbar Hydari, Nawab Salar Jung Bahadur and Sir Homy Mody.
Over the years, the Tata Group has sold all the stake (about 14.45%) in ACC to Ambuja Cements India Limited (formerly Gujarat Ambuja Cements Limited). Ambuja Cements is the largest stakeholder in ACC. In 2005, Holcim group of Switzerland, a major supplier of cement and concrete, took stake in Ambuja Cements. Holcim, along with Ambuja Cements made an open offer to acquire majority stake in ACC. As of June 2007, Ambuja Cements has 42.74% stake in ACC.
Business Profile:
ACC manufactures the following products:
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Ordinary Portland Cement Grade 43/53
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Blended cement (Fly-ash based Portland Pozzolana Cement, Portland Slag Cement)
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Bulk cement
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Ready mixed concrete
ACC also offers consultancy services for the cement industry. It has assisted in project management/operations/debottlenecking for cement plants in Saudi Arabia, Nigeria, Sudan and United Arab Emirates.
Ready Mixed Concrete Truck
ACC has also developed an IT infrastructure that interconnects its offices, plants, marketing division and product handling terminals. A mix of Very Small Aperture Terminals and Virtual Private Networking links ensure adequate connectivity between these locations.
ACC helps local communities near its factories by sharing the amenities and facilities such as roads, bore wells, drinking water, educational facilities, healthcare systems etc.
ACC has won several national/international awards for excellence, including:
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Sword of Honour - by British Safety Council, United Kingdom for excellence in safety performance.
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Indira Gandhi Memorial National Award - for excellent performance in prevention of pollution and ecological development
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Good Corporate Citizen Award - by Bombay Chamber of Commerce and Industry for working towards an environmentally sustainable industry while pursuing the objective of creation of a better society.
Financial performance:
http://groups.google.com/group/theindiastreet/web/ACC_Fin_Perform_091007.jpg
Note: For year 2005, 9 month period between April and December is considered. For the year 2006, 12 month period between January and December is considered. For other years, usual financial year (April to March) is considered. (Source: ACC web site, www.acclimited.com)
Stock market performance:
ACC is a constituent of BSE Sensex (Scrip Code: 500410, Group: A, Free float market capitalization: Rs.12540 crores, weightage: 1.08%) and also Nifty (Ticker: ACC, FFMC: Rs.22,437 crores, weightage: 0.81%). ACC is also traded in Futures and Options segment at NSE (Lot size: 375 shares).
Let us now discuss the long term, medium term and short term view of the stock.
ACC had a bonus issue as well as a stock split. In June 1996, it announced a 3:5 bonus (i.e. 3 bonus shares for every 5 shares held). In 1999, the stock’s face value was split from Rs.100 to Rs.10. The above adjustments have been incorporated in the price/volume data in the charts displayed below.
Long term view:
http://groups.google.com/group/theindiastreet/web/ACC_M_091007.jpg
The long term investors need to exit this stock; In the monthly chart, it has formed a higher and a higher low while the slow stochastic indicator has formed a lower high and lower low. This is called “negative divergence” and forewarns a trend reversal. The stock had closed at 116.95 in October 1997 and last month it closed at 1197 gaining little more than 1000% in 10 years. This is a good return. Long term investors may consider booking profits at the current levels.
Medium term view:
http://groups.google.com/group/theindiastreet/web/ACC_W_091007.jpg
This is an interesting weekly chart for the technical analyst. An “ascending triangle breakout” occurred in it during November 2006. Technically the upper side target for this stock would have been 1525. But a bearish engulfing pattern was formed in the last week of January 2007. The stock broke the support trendline and the ascending triangle breakout failed; it managed to reach a low of 678.10. Last support existed at 601. What happened after that is a perfect Elliot wave pattern. See the waves 1 through 5 marked on the chart. The 5 th wave registered a high of 1299, falling just short of 1356.20 which would be 100% retracement level from a low of 678.10. Those who bought this stock after the “ascending triangle” breakout should have ideally exited when the stock hit more than 1195, its previous high. Interestingly, watch the volumes decline gradually as prices rise. Medium term investors need to exit the stock at every possible opportunity.
Short term view:
http://groups.google.com/group/theindiastreet/web/ACC_D_091007.jpg
The short term scenario is not encouraging for the investors. The stock had broken its resistance at 1159 on September 19 but it failed to close above it. After 5 trading sessions, it did close above it. But, many “doji” bodies can be found between September 24 and October 3. This indicates indecision in the market. On October 5, a bearish “Three outside down” pattern can be seen in the daily chart. This could have been an ideal reversal signal if the lower shadow of the green candle was also engulfed by the lower shadow of the red candle. However, the stock has broken its support trendline on October 8 as shown in the chart. This is the confirmation of the trend reversal. Short term investors need to exit the stock.
Conclusion:
Short, medium and long term investors may consider profit booking in the stock.
Sundaramurthy Vadivelu
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