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Near-term outlook cautious

We retain our BUY rating on ACEM, while revising our target price downward to INR 570/share (earlier INR 660/share), reflecting a more cautious outlook. The reasons for this revision are (1) Slower industry growth of ~5% projected in FY27E, (2) A weak pricing environment amid subdued demand, limiting the ability to pass on cost pressure and (3) The impact of integrating Penna and Sanghi Cement, which weighs on near-term profitability and execution, due to lower utilisation and higher-than- expected maintenance capex and cost.

However, our BUY rating on ACEM is based on the following: 1) Capacity expansion to add ~10 Mtpa of capacity in FY27E, 2) Management guides INR 150–200/t cost-saving in FY27 from fly ash and green energy and 3) Increasing premium product share, which drives better realisation.

We forecast ACEM EBITDA to expand at a CAGR of 20.7% over FY26–29E, supported by our assumption of volume growth at 8.0%/10.0%/12.0% and realisation growth of 2.5%/1.0%/0.5% in FY27E/FY28E/FY29E, respectively.

We value ACEM using an EV/CE framework, assigning a 2.0x multiple to FY28E, resulting in a revised 1-year forward target price of INR 570/share.

Q4FY26: Cost pressure offsets volume gain

ACEM reported Q4FY26 revenue and EBITDA of INR 1,09,155 Mn (+9.4% YoY, +6.2% QoQ) and INR 14,639 Mn (-21.6% YoY, +8.2% QoQ). Volume for Q4 stood at 20.1 Mnt, up 7.5% YoY and up 5.8% QoQ. Trade mix stood at 74%, in line with management guidance, while premium products remained strong at 36% of trade volumes, delivering 22% YoY growth.

Realisation/t came in at INR 5,431/t (+1.7% YoY, +0.4% QoQ). Total cost/t came in at INR 4,702/t (+8.4% YoY, +0.1% QoQ). As a result, EBITDA/t came in at INR 728/t, down 27.1% YoY and up 2.3% QoQ.

West Asia headwinds to persist; Cost actions underway:

Q4 was impacted by elevated cost pressure driven by higher fuel and diesel prices, tight packaging bag availability and INR depreciation — largely linked to the ongoing West Asia crisis. Management expects these headwinds to continue into H1FY27.

We expect cost pressure to remain elevated in Q1FY27, with overall cost inflation likely in the range of INR 120–150/t QoQ, primarily due to fuel and logistics.

Key Risks:

* Volatile geopolitics: Possible prolonged geopolitical disruption could lead to an increase in petcoke price, resulting in higher input cost and margin pressure.

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