Buy ACC; target of Rs 3262 Prabhudas Lilladher

Prabhudas Lilladher's research report on ACC

ACC reported in-line operating performance in 2QFY25 led by higher volume growth. Volumes grew 15% YoY to 9.3mt aided by higher trade volume and better growth in premium products. Average NSR declined 1.6% QoQ as cement prices declined across regions, due to weak demand amidst monsoon. However, due to higher share of traded goods, EBITDA was in line with PLe as rest of the costs were largely in-line. Operating costs declined YoY, but was largely in line with peers; the impact of cost saving measures is still awaited. In 2HFY25, demand is expected to improve aided by infrastructure projects leading to higher industry utilization, and pricing would follow suit. With Adani Group’s superior execution capabilities, we expect not only improved pace of capacity addition but also higher capex on efficiency improvement for ACC units. Cement capacity is expected to grow to 44.2mtpa (incl ACCPL) by FY26E.

Outlook

We cut FY25/26/27 EBITDA estimates by 9%/8%/3% on lower pricing assumptions and expect EBITDA to grow at a CAGR of 8% over FY24-27E. The stock is currently trading at 11x/10.1x EV of FY26E/FY27E EBITDA. Maintain ‘BUY’ with revised TP of Rs3,262 (Rs3,457 earlier) valuing at long-term EV multiple of 15x Sep’26E EBITDA.

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