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Earnings miss; weak volume and margin pressure Soft demand; near-term challenges persist

* ACC’s 1QFY27 performance was below our estimates. Revenue/EBITDA declined ~5%/44% YoY to INR57.7b/INR4.3b (~4%/31% below our estimate). EBITDA/t declined ~40% YoY to INR404 (vs. est. INR576). OPM dipped 5.2pp YoY to 7.5% (-2.9pp vs. our estimates). Adjusted PAT was down ~57% YoY to INR1.7b (~41% miss).

* Management indicated that demand growth would be soft at ~5% in FY27. While the near-term growth may remain affected by seasonality and geopolitical uncertainties, the sector’s long-term outlook remains constructive. ACC believes that the combined impact of peak fuel costs and seasonally weak 2Q will put pressure on profitability in the near term. However, it remains focused on mitigating these pressures through fuel mix optimization, higher RE share, logistics efficiencies, and focus on highermargin markets.

* We cut our EBITDA estimates for FY27E/FY28E by ~10%/7% due to lower realizations and cost pressure. The stock is trading fairly at 9x/7x FY27/ FY28E EV/EBITDA. We value the stock at 7x FY28E EV/EBITDA to arrive at our TP of INR1,270. Reiterate Neutral.

Sales volume down ~6% YoY; EBITDA/t at INR404 (est. INR576)

* ACC’s 1QFY27 revenue/EBITDA/PAT stood at INR57.7b/INR4.3b/INR1.7b (- 5%/-44%/-57% YoY and -4%/-31%/-41% vs. our estimates). Sales volume was down ~6% YoY at 10.75mt. Cement realization dipped ~1% YoY (3% below est.). RMC revenue grew ~20% YoY to INR5.0b.

* Opex/t was up 7% YoY, led by an increase in variable/other expenses per ton by ~12%/3%. Freight cost/employee cost per ton declined ~2%/4% YoY. EBITDA/t declined 40% YoY to INR404. Depreciation increased ~3% YoY and finance cost declined ~11% YoY. Other income fell ~14% YoY. The effective tax rate was 25.3% vs. 33.0% in 1QFY26.

* Cash and cash equivalents stood at INR3.75b vs. INR4.8b as of Mar’26

Key highlights from the management commentary

* SEBI NOC for the proposed amalgamation of ACC with ACEM was received on 4th Jun’26. An application has been filed with the NCLT on 29th Jun’26. The transaction is expected to be completed during FY27.

* Green power share stood at 31% vs. 26%/31% in 1QFY26/4QFY26. Premium products as a % of sales stood at 44% vs. 41%/45% in 1QFY26/4QFY26

* The trial run has started for the 2.4 mtpa grinding unit at Salai Banwa (UP). The 1.0 mtpa capacity expansion in Kalamboli, Maharashtra, is expected to be commissioned in 2QFY28.

Valuation and view

* ACC reported weak earnings in 1QFY27, led by lower volume and realization than our estimates. Higher MSA continues to lead to higher purchase costs of finished goods, while higher fuel costs also weigh on margins in 1Q. Apart from that, other expenses also increased sharply due to higher packaging costs. We believe profitability would remain under pressure due to elevated costs.

* We estimate a CAGR of 3%/4%/9% in revenue/EBITDA/PAT over FY26-28. We estimate a muted volume CAGR of ~2% over FY26-28. We estimate its EBITDA/t at INR529/ INR623 in FY27/FY28 vs. INR599 in FY26. The stock has seen significant de-rating in valuations due to continuing weak profitability. We value the stock at 7.0x FY28E EV/EBITDA to arrive at our TP of INR1,270. Reiterate Neutral.

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