ACC Q3 Review — Systematix Maintains 'Buy', Says Robust Volume Growth, Cost Efficiencies Drives Optimism

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Systematix Research Report

ACC Ltd.’s numbers were a positive surprise as revenue/Ebitda/PAT exceeded our estimates due to the effect of government incentive accruals (Rs 7 billion). The company clocked an Ebitda/tonne at Rs 1,037 led by Adani group's thrust on cost excellence.

Standalone Revenue was up 19.9% YoY (+28% QoQ) to Rs 59 billion which was in line with our estimates barring the one-off incentive benefit. Volume was up by a strong 20.2% YoY (+15.1% QoQ) to 10.7 mtpa against our estimate of 10.2 mtpa.

Blended realisation remained flattish YoY and stood at Rs 5,510/tonne; a rise of 11.2% QoQ. Ebitda for the quarter rose 22.8% to Rs.11.1 billion versus our estimate of Rs 6.4 billion. Ebitda margin stood at 18.8% (versus 18.4% in Q3 FY24). Ebitda/tonne rose 2.2% YoY and surged 124% QoQ to Rs 1,037/tn.

Power and fuel cost fell 31% YoY to a multi-year low of Rs 786/tn due to use of low cost imported petcoke, improved linkage and captive coal consumption. Adjusted PAT more than doubled to Rs 10.9 billion (versus Rs 5.3 billion in Q3 FY24) broadly in line with our estimates barring the one-off incentive effect. The captive coal usage, along with synergies with group companies, have led to a 10% decrease in kiln fuel costs.

Additionally, the thermal value has decreased from 739 kCal to 732 kCal, with further improvements expected in the upcoming quarters. Freight costs also declined 10.2% YoY to Rs 971.

Green power and AFR consumption as a share of total power mix stood at 18.7% and 9.6% in Q3 FY25. Kiln fuel cost improved from Rs 1.86 per KCal to Rs.1.68 per Kcal.

We factor a 9.0%/10.6%/13.6% volume/revenue/Ebitda CAGR over FY24-FY26E. We keep our estimates unchanged with a target price of Rs 2,701 based on 12x FY26E EV/Ebitda, factoring the risk of prevailing weak demand and price conditions. We maintain Buy on the stock.

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