Broker’s call: ACC (Buy)

Target: ₹2,545

CMP: ₹1,993.80

ACC reported weak numbers for Q3FY25 as adjusted EBITDA came in at ₹470 crore, which was down 48 per cent y-o-y and 25 per cent below our expectation.

Reported numbers are higher owing to couple of one-off items viz reversal of tax provision of earlier years amounting to ₹530 crore and refund of incentives/exemption of excise duty of earlier years amounting to ₹637 crore. Adjusted for the same and higher income tax, the PAT at ₹230 crore was down 57 per cent y-o-y and 28 per cent below our estimate.

While volume growth was much better at 20 per cent y-o-y (including MSA and Sanghi volume), margins took a dent owing to a q-o-q decline in realisations against our expectation of an increase.

The management expects profitability to improve as capacity utilisation of acquired capacities improves and impact of efficiency improvement measures kicks in.

We are building in 5/12 per cent revenue/EBITDA CAGR for ACC over FY24-FY27. Volume growth for ACC will largely be driven by MSA agreement with Ambuja and incremental volume from Sanghi and Penna assets. We believe that the timing and valuation of ACC’s merger with Ambuja will remain an overhang on the stock.

We maintain our estimates on ACC and continue to value it based on 10x FY27E EV/EBITDA to arrive at our target price of ₹2,545.