Buy ACC; target of Rs 2625: Emkay Global Financial

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26 Aug, 2025 12:21

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Emkay Global Financial's research report on ACC

Q3CY22 EBITDA sharply declined YoY and QoQ to Rs164mn vs our estimate of Rs3bn (Consensus: Rs2.8bn), owing to significantly higher-than-expected increase in cost/ton. Accordingly, blended EBITDA/ton declined to a multi-year low of only Rs24 (Emkay est.: Rs425). The Ametha integrated project (2.7mt clinker and 1mt cement grinding) is delayed by a quarter and is expected to be commissioned by Mar-23. The ongoing expansion project (including a 2.2mt grinding unit at Salai Banwa) will increase ACC’s grinding capacity to 39mt (from 36mt currently) by mid-CY23. Factoring-in the Q3CY22 miss, the delay in Ametha project commissioning, and a more gradual realization of Group-synergy benefits [Rs100/ton over 3-years], we cut our EBITDA estimates for CY22 by 30% and for CY23-24 by 12-15%.

Outlook

The stock provides favorable risk reward, with peaking of cost, discontinuation of royalty payments to Holcim, likely cost synergies with the promoter group and nearly 15% correction in the last one month (vs broader indices largely flat). Accordingly, we upgrade the stock to BUY (earlier Hold) and revise our Sep-23E TP to Rs2,625 (earlier Rs2,970). Our DCF-based TP implies a 1-year forward EV/EBITDA of 12x (unchanged). Downward revision in ACC’s stock price may lead to ~3% reduction in Ambuja’s TP.

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ACC - 181022 - emkay