Buy ACC; target of Rs 2451: ICICI Securities

ICICI Securities research report on ACC

ACC had a decent performance in Q2FY24 with EBITDA/t at INR 677 (4% below estimates), down 17% QoQ mainly due to seasonal low-operating leverage. While realisation disappointed, falling 1.2% QoQ, the underlying price improvement across regions is driving ~3% upwards revision to each of our FY24E and FY25E EBITDA estimates. In the backdrop of – a) improving pricing environment; b) volume gains from the recently commissioned 3.3mtpa clinker facility in Central India; c) a strong balance sheet (net cash of >INR 36bn) and d) RoEs of ~12% - current valuations of 9.1x FY25E and 8.2x FY26E EV/EBITDA appear extremely attractive.

Outlook

Hence, we upgrade ACC to BUY (Add earlier) keeping valuation multiple of 12.5x unchanged. Rolling over valuations to Q2FY26E yields us a target price of INR 2,451 (INR 2, 338 earlier).