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ACC’s Q3FY24 EBITDA was a robust beat on our/consensus estimates by 27- 30% mainly owing to lower-than-expected costs. EBITDA more than doubled YoY to Rs9.1bn (up 65% QoQ) with EBITDA/ton crossing the Rs1,000 mark post nine quarters (Emkay est: Rs825). Total cost/ton declined 17% YoY (6% QoQ) to Rs4,505 (vs. our est. of flat cost QoQ) owing to cost savings across line items. Blended realization improved 1% QoQ to Rs5,522/ton. Volume growth surprised positively with 15% YoY growth to 8.9mt, partly led by increased MSA transaction with Ambuja Cement. We increase our EBITDA estimates upwards by 13-15% in FY25-26E, citing consistent cost-saving measures and the recent acquisition of Asian Concretes & Cements. Given the healthy B/S and attractive valuation, we maintain BUY with a revised Dec-24E TP of Rs2,900 (13x EV/E).

Result Summary

Volume trajectory continued to remain healthy in Q3FY24 with 15% YoY growth (10% QoQ) to 8.9mt, on likely higher MSA with Ambuja. For 9MFY24, volume growth stood at an impressive 19% YoY to 26.4mt. Overall cost/ton fell Rs283/ton QoQ to Rs4,505/ton in Q3FY24 with delta-driven by reduction in fixed overheads (down Rs197/ton), freight costs (down Rs94/ton), and RM+P&F cost (down Rs40/ton). Operational efficiencies have started to yield results with total cost/ton down 15% YoY in 9MFY24. Subsequently, profitability improved sharply by Rs340/ton QoQ to Rs1,017/ton in Q3FY24. Furthermore, better working capital management resulted in net cash increasing by Rs6.5bn QoQ to Rs43bn as of Dec-23. In Q3, the company acquired an additional 55% stake in an associate company, Asian Concretes & Cements (Asian), for a cash consideration of Rs4.3bn. Asian has an overall capacity of 2.8mt; however, ACC was likely selling 1mt under a tolling arrangement. The said acquisition will likely increase volumes further by 1.2-1.3mt with additional EBITDA of Rs2-2.2bn p.a.

What we liked: Strong volume growth with improved profitability

What we did not like: Weak performance in the RMC division

Other operational highlights

1) Fuel cost in Q3FY23 stood at Rs1.86 vs. Rs2.59/Rs1.85 in Q3FY23/Q2FY24. 2) For the RMC segment, revenue fell 20% YoY (flat QoQ) to Rs3bn with volumes down 16% YoY (constant QoQ) to 0.7mn CBM. It reported EBIT loss of Rs45mn in Q3FY24 vs. profit of Rs46mn in Q3FY23 (Q2FY24: Rs33mn). 3) ACC commissioned 1mt of GU at Ametha in Q3. Earlier in Q2, ACC had commissioned a 3.3mt clinker facility in Ametha. 4) WHRS at Ametha with 16.3MW capacity has been commissioned, taking the overall capacity to 46.3MW. 5) Share of WHRS improved 270bps YoY to 9.1%. 6) Work on the WHRS facility at Chanda (18 MW) and Wadi (21.5 MW) is on track and will be commissioned in FY25, which will take the overall capacity to 85.8MW with total share of 25% in the power mixWhat we did not like: Weak performance in the RMC division

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