ACC Ltd. share price target

Volume-led topline growth truncated by muted realisations (+1% YoY) in Q4, an indication of market share pressure

We maintain our BUY recommendation on the stock while revising our estimates for FY24 and FY25 slightly lower.

ACC has put up a decent operational performance for the quarter ending March 2023. Except realisation (which slipped >4% QoQ), ACC fared well on all other fronts. Notably – a) volumes surged >10% YoY despite plant shutdown in Himachal Pradesh for nearly half the quarter; b) freight cost/t eased ~7% QoQ while overall variable cost/t dipped ~6% QoQ; c) fixed cost (staff + other expenses), too, was down 4% YoY.

Pricing power is crucial in the commodity business and the Indian cement sector is certainly losing the plot on that front. Elevated competitive intensity across regions, has prevented margin-accretive price hikes, despite: a) robust demand (Q4FY23E prices slipped ~1% QoQ notwithstanding peak season volume surge of ~10% YoY)

ACC’s Q4CY22 EBITDA of Rs3.8bn (down 32% YoY) was in line with our / consensus estimates. Total cost/te declined 7% QoQ (yet rose 13% YoY) due to significant dip in unit energy and logistics costs (-24% and -9% QoQ, respectively). However, unit RM cost increased 35% QoQ. Further, blended realisations (assuming ‘other operating income’ at Rs954mn) improved 1% QoQ (up 7% YoY).

We maintain our BUY recommendation on the stock however we have reduced our estimates forFY24; FY25 owing to delay in capacity expansion and temporary shutdown of plant in Himachal Pradesh.