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Result Synopsis

In 2QFY25, ACC’s revenue grew by 3.9% YoY but declined by 10.6% QoQ to Rs40bn, is 15% ahead of our estimate due to higher-than-expected volume and realization. Volumes were up by 14.8% YoY but declined by 8.8% QoQ. The QoQ decline in volume mainly due to heavy seasonal impact and intensifying competition in the industry. While realization was dropped 9.5% YoY and 2% QoQ due to persistent of weak pricing across the geography due to seasonal impact and sluggish demand. The Volumes were 16.8% and realization was 6.3% ahead of our estimates. EBITDA stood at Rs4.3bn (a decline of 21.7% YoY and 36.6% QoQ), is 31.5% below our estimate. EBITDA/tn stood at Rs462 (a decline of 31.8% YoY and 30.5% QoQ) vs. our estimate of Rs728, is 36.6% below our estimate. Adj. PAT declined by 39.1% YoY and 36.1% QoQ to Rs2.4bn vs. our estimate of Rs3.3bn (is 28.4% below our estimate). Decline in EBITDA/tn mainly due to weak top-line growth coupled with marginal increase in Opex/tn (+2.3% QoQ). While decline in Adj. PAT mainly due to lower EBITDA coupled with higher depreciation charges and interest expenses despite lower tax and increase in other income.

Upcoming grinding unit to add volumes: 1.6mtpa grinding unit at Sindri, Jharkhand and 2.4mtpa grinding unit at Salai Banwa, Uttar Pradesh is expected to commission by 4QFY25 / 1QFY26 respectively. ACC’s current capacity utilization stands at 91% which is almost near to peak level. We expect the upcoming capacity to add volumes to cater increment demand in the regions (i.e., central). We are factoring a volume growth at 5.6% CAGR over FY24-FY27E at avg. capacity utilization of 92%.

EBITDA/tn to improve further, despite weak realization: Though industry is facing certain challenges especially weak pricing, we believe various cost saving programs coupled with Master Supply Agreement (MSA) and synergy benefits to control cost structure in near-term to lead margin expansion. ACC’s MSA with Ambuja Cement, Sanghi Industry and volume addition from Penna Cement have helped to improve volume. We expect further improvement in volume primarily driven by early ramp-up of Penna Cement coupled with higher premium segment sales (~36% in Q2FY25). Ongoing cost efficiency projects, higher usage of captive coal mines and green energy usage (14.1% in 2QFY25), reduction in lead distance through warehouse optimization are the key focus area of the management to reach a cost savings of Rs450-500/tn (Ambuja + ACC) in near-term. Despite weak realization, we believe, ACC’s EBITDA to improve further led by cost respites. We are factoring avg. cost saving of Rs315/tn over next three years to arrive at an EBITDA/tn of Rs813/ Rs945/ Rs1151 level in FY25E/ 26E/ 27E.

Outlook & Valuation:

At the current market price, the stock is trading at 8.4x forward Sep’26E EV/EBITDA. anticipate tepid industry growth in FY25E, impacting ACC due to pricing pressures and regional challenges. However, we expect gradual improvement from FY26E onwards. We have cut our estimates and building Revenue/ EBITDA/ PAT at 4%/ 16%/ 11% CAGR over FY24-FY27E in the anticipation of weak pricing. And we reduced our Sep’26E EV/EBITDA multiple to 11x (Earlier 12x) with revise target price of Rs2909 (Earlier Rs3256) with unchanged BUY rating. Any price decline, subdued demand and delay in capacity expansion is key downside risk to our recommendation.

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