Buy ACC; target of Rs 3707: Prabhudas Lilladher

Prabhudas Lilladher's research report on ACC

ACC (ACC) reported better than expected operating performance in 1QFY25 mainly led by higher volume growth and measures being undertaken for cost reductions. Volumes grew 8.5% YoY to 10.2mt aided by premium products and improvement in efficiency parameters. Average NSE declined 2.8% QoQ which was largely inline as cement prices declined across regions during the quarter. P&F costs improved on better fuel mix, higher AFR and higher proportion of WHRS. Work on WHRS facility at Chanda (18 MW) & Wadi (21.5 MW) is on track and expected to get commissioned in 2QFY25. With Adani group’s superior execution capabilities and focus on profitability, we expect not only improved pace of capacity addition but also capex on efficiency improvement for ACC units. Cement capacity is expected to grow to 44.2mtpa (incl. ACCPL) by FY26E. Although near term pricing scenario is weak, as demand improves leading to higher industry utilization, pricing would follow the suit. We expect revenue/EBITDA/PAT to grow at a CAGR of ~23%/32%/28% over FY24-26E.

Outlook

The stock is currently trading at 13.1x/10.5x EV of FY25E/FY26E EBITDA. Maintain ‘BUY’ with TP of Rs3,707 valuing at long term EV multiple of 15x Mar’26E EBITDA.

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