Buy ACC; target of Rs 2,374: Prabhudas Lilladher

Prabhudas Lilladher's research report on ACC

ACC reported robust operating performance in Q2FY26 led by strong volume growth and higher than expected cement realizations. Cement volumes grew 16% YoY aided by MSA. Average cement NSR grew 2.4% QoQ led by sharp rise in share of premium products in trade segment despite weaker prices. NSR including clinker was flat QoQ. Improved fuel mix, higher share of RE power, increase in direct dispatches and higher volume growth kept the costs well constrained which led to EBITDA/t of Rs 846 (+67% YoY). ACC has also announced debottlenecking capex of USD48/t to increase capacity by 5.6mtpa at various facilities. Ongoing 3.4mtpa (Salai Banwa and Kalamboli) seems to be on track and expected to be commissioned in Q3FY26. This capacity addition, along with access to parent’s 30mtpa clinker capacity and 1000MW RE power, will support double-digit volume growth and bring cost efficiencies over the long term.

Outlook

While execution of internal efficiency projects is still in early stages, we expect ACC’s operating performance to improve gradually over the next two years, in line with the mgmt’s broader plans to consolidate operations under ACEM and achieve cons. cost target of Rs 3,650/t by FY28E. This integration, if receives impartial treatment would fade investors’ concerns on ACC. We increase our FY26/27/28E EBITDA estimates by 3% to factor in higher volumes. We expect ACC to deliver Revenue/EBITDA/PAT CAGR of 10%/19%/10% over FY25-28E. Stock is currently trading at 8.2x/7.2x EV of FY27/28E EBITDA. Maintain ‘BUY’ with revised TP of Rs 2,374 (Rs 2,311 earlier) valuing at an EV multiple of 10x Sep’27E EBITDA.