Buy ACC; target of Rs 1600: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on ACCACC reported earnings for Q1CY16 above our expectation on the back of lower than expected costs. We expect sustainable reduction in costs on the back of shift to pet coke (likely to reach to 60% by Q3CY16 end against existing 17% in CY15), commissioning of fully modernised facility at Jamul (its share at 15% of CY16 capacity) and rationalisation of freight cost. Driven by improved quality of operations, we maintain our BUY rating with TP of Rs1600, EV/EBITDA of 13x CY17E. We see strong potential for re‐rating of the stock as lower costs are sustainable in nature, driven by improvements in efficiency and flexibility in fuel mix. ACC underperformed its peers for a considerable period due to its high cost operations. ACC is addressing its high costs with the modernisation of old and obsolete plants, increased usage of pet coke/alternate fuel and rationalisation of freight cost. We expect continuous reduction in costs over the next 12 months on the back of elevated capacity utilisation and commissioning of modernization projects. Controlled costs and improved outlook on demand drive our strong estimates for CY16‐CY17 projecting ~36% CAGR growth in EPS. CY16 would have the partial benefit of new 2.8m t clinker line in Jamul (Chhattisgarh) and higher usage of pet coke.

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