Buy ACC; target of Rs 2300 : Emkay Global Financial

Emkay Global Financial's research report on ACC

Q3FY23 EBITDA declined 32% YoY to Rs3.8bn, with blended EBITDA/ton also declining similarly, to Rs492 – both being broadly in line with our estimates. Higher working-capital requirements (up Rs27bn YoY) led to a steep decline in the cash balance (fall of Rs45bn YoY) to Rs30bn, as of Dec-22; commissioning of the Ametha project (clinker: 2.7mt; cement: 1mt) has been delayed by six months to Q2FY24. Factoring-in the slow pace of price hike, higher cost/ton and delay in project commissioning, we reduce our FY24E25E EBITDA by 11-12% and our target EV/E multiple by one notch to 11x (in line with the last five-year average).

Outlook

We revise our TP to Rs2,300/share (earlier Rs2,625), based on 11x Mar-25 EV/E (on half-yearly roll-over). Given the strong balance sheet, likely FCF generation of >Rs20bn p.a. over the next couple of years and favorable valuation at CMP (10x FY24E EV/E), we maintain BUY from a medium-term perspective.