Accumulate ACC Limited For Target Rs. 2,813 - Elara Capital
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Lower fixed costs lead to margin surprise In-line revenue, EBITDA above expectations ACC’s (ACC IN) EBITDA surged ~139% YoY and ~65% QoQ to ~INR 9bn, above our and Consensus estimates of ~INR 7.2bn each, primarily led by lower-than-expected operating cost. Net sales grew ~8% YoY and ~11% QoQ to ~INR 49bn, whereas adjusted PAT jumped ~211% YoY and ~37% QoQ to ~INR 5.3bn. Cash and cash equivalent stood at ~INR 42.8bn as of December 2023 versus ~NR 36.3bn as of September 2023. EBITDA per tonne up ~105% YoY and ~50% QoQ Cement realization fell ~6% YoY but grew ~2% QoQ to INR 5,227/tonne. Sales volume rose ~16% YoY and ~10% QoQ to 8.9mn tonnes. Further, operating cost fell ~17% YoY and ~6% QoQ to INR 4,513/tonne, led by a sharp drop in employee cost, freight cost and other expenses. Despite higher volume, QoQ fall in employee cost, other expenses was ~8% and ~7% respectively in absolute terms. Thus, EBITDA/tonne rose ~105% YoY and ~50% QoQ to INR 1,015. Cement capacity reaches ~38.6mn tonnes ACC started a 1.0mn tonne grinding capacity at Ametha (Madhya Pradesh) in Q3FY24. Further, in January 2024, ACC raised its stake from 45% to 100% in Asian Concretes and Cements Private (ACCPL) for ~INR 3.1bn. Thus, ACC’s current cement capacity is ~38.6mn tonnes. Further, in Q3FY24, ACC added 16.3MW waste heat recovery system (WHRS) capacity at Ametha. Further, expansions at Maharashtra-based Chanda unit (18MW) and Karnataka-based Wadi unit (21.5MW) are likely to be completed in FY25, increasing WHRS capacity to 85.8MW. Valuation: Revise to Accumulate, TP raised to INR 2,813 We expect ACC to continue to accrue benefit from the master supply agreement (MSA) with Ambuja Cements and Sanghi Industries. Also, current international thermal coal prices are down ~31% versus recent peak of mid-October, which will enable ACC to check cost. We raise FY24E/25E/26E EBITDA by ~7%/11%/16%. Also, we roll over to December 2025E from September 2025E and up our TP to INR 2,813 from INR 2,421 on 12x (unchanged) December 2025E EV/EBITDA. As ACC is up ~30% since the release of our report, ‘Higher other income drives PAT’ dated 26 October 2023, we revise our rating to Accumulate from Buy.
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