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Beat On All Fronts; Retain BUY

Est. Vs. Actual for Q1FY26: Revenue – BEAT; EBITDA Margin – BEAT; PAT – BEAT

Change in Estimates post Q1FY26 (Abs.)

FY26E/FY27E: Revenue: 4%/4%; EBITDA: 0%/1%; PAT: -3%/3%

Recommendation Rationale

* Capacity Expansion to Drive Volume and Revenue Growth: The company is increasing its capacity from 104.5 MTPA (including 8.5 MTPA from Orient Cement) to 118 MTPA by FY26. It is also targeting 140 MTPA by FY28 through additional expansion. This capacity growth is expected to support sustained momentum, with volume and revenue projected to grow at 11% and 12% CAGR over FY24–FY27E.

* EBITDA Margins Expected to Expand: During the quarter, EBITDA margin improved to 19.1% driven by better realisation and robust volume growth. Efficiency gains have reduced costs by Rs 150 per tonne. The company targets an additional Rs 300–350 in cost savings by FY28 through operational improvements—lowering the clinker factor, cutting logistics expenses, increasing green power use, boosting blended cement sales, and expanding EBITDA margins. We project EBITDA margins to rise to 20%-21% by FY27E. The company aims to reduce production costs to Rs 3,850 per tonne and achieve EBITDA/tonne of Rs 1,500 by FY28.

* Cement Sector Consolidation Enhances Competitive Advantage for Big Players: Between 2013 and 2024, large players increased their market share from 46% to 57%. By FY27–28, it is expected to rise further to 65%–70%. As consolidation and capacity expansion among top players accelerate, market share gains will continue, supporting stronger cement pricing, better economies of scale, and improved supply chain efficiency. As the 2nd leading player, the company is well positioned to capitalise on this trend over the medium to long term.

Sector Outlook: Positive

Company Outlook & Guidance: Strong focus on volume expansion, premiumization, and pricing power, coupled with cost reduction, operational excellence, and synergies between the cement businesses and the Group, will help improve profitability in the coming quarters. Strong infrastructure demand and ongoing needs from the housing and commercial sectors are anticipated to boost cement demand in FY26. Strategic investments in roads, railways, and urban and commercial amenities are poised to drive robust growth. The company expects industry demand in FY26 to grow in the range of 7%-8%. Prices are currently stable and are expected to trend in a positive direction.

Relative Performance

Current Valuation: 17x FY27 EV/EBITDA (Earlier Valuation: 17x FY27 EV/EBITDA).

Current TP: Rs 660 /share (Earlier TP: Rs 655/share).

Recommendation: We maintain our BUY rating on the stock.

Alternative BUY Ideas from our Sector Coverage: UltraTech Cement Ltd (TP13,840/share), Dalmia Bharat (TP-2,550/share), ACC Ltd (TP-2,260/share), Birla Corporation (TP-1560/share)

Financial Performance

ACL reported results exceeding expectations, driven by higher volume, better realisation QoQ, and the benefit of operating leverage. The company reported an EBITDA margin of 19.1% against 15.4% YoY (expectation 17.3%). It posted a 24% YoY revenue growth, supported by a 20% volume growth to 18.4 MTPA, attributed to increased trade volumes and higher sales of premium products. ACL's blended EBITDA per tonne stood at Rs 1,065, up 32% YoY and higher than our expectation of Rs 927/tonne. Blended realisations per tonne were Rs 5,591, up 6% YoY/QoQ. Cost per tonne was higher by 2% YoY at Rs 4,526. The company reported a profit of Rs 787 Cr, up 22% YoY and higher than our expectation of Rs 535 Cr.

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