Buy ACC; target of Rs 2878: Prabhudas Lilladher

Prabhudas Lilladher's research report on ACC

ACC reported weak operating performance in 3QFY25 despite strong volume growth. Volumes grew 20% YoY to 10.7mt aided by higher trade volume and better growth (11% YoY)in premium products. Average NSR declined 0.6% QoQ as cement prices remained under pressure during the quarter and ACC’s higher proportion of Southern region where price hikes couldn’t sustain. Higher MSA and traded volumes led to higher purchase of finished goods in RM costs which led to sharp decline in EBITDA, although rest of the costs were well constrained. Optimization of fuel basket with lower fuel costs, increased use of Green share and higher volumes led to 30% YoY decline in P&F costs. Reduction in lead distance and higher direct dispatch led to 10% YoY decline in freight costs. Adjusting for prior period amount EBITDA/t works out at Rs448.

Outlook

We cut FY26/27E EBITDA estimates by 12%/11% on lower pricing assumptions. The stock is currently trading at 11.3x/9.9x EV of FY26/27E EBITDA. Maintain ‘BUY’ with revised TP of Rs2,878 (Rs3,251 earlier) valuing at long-term EV multiple of 15x Sep’26E EBITDA.