ACC Ltd. remains a good buy despite lower than expected first-quarter results as the Adani group focuses on cost-saving efforts, according to Citi Research.
The brokerage maintained its 'buy' rating on the stock and a target price of Rs 3,000 apiece, implying an upside of 14.9% from previous day's close.
ACC Ltd.'s revenue for the first quarter of fiscal 2025 exceeded analysts' estimates.
The Adani Group-owned cement manufacturer reported Rs 5,155 crore in revenue for the three quarter-ended June, according to an exchange filing. Analysts tracked by Bloomberg had estimated it at Rs 5,088.7 crore.
The cement manufacturer's sales volumes rose by 10% compared to last year, reaching 10.2 million tonne. This is slightly more than the 10 million tonne anticipated by Citi.
Further, the company plans to open a new grinding unit with a capacity of 1.6 million tonne. This plant will be built in Sindri by the end of fiscal 2025.
In financial 2025, it also expects cement demand in India to grow by 7-9%, and the country's gross domestic product growing at 6.5-7%, it said.
Most of the new capacity will likely come from Ambuja Cement Ltd. and ACC should benefit from the Adani's cost focus, the brokerage said while raising their target multiple for the cement maker from 12.5-times September 2025 estimate of enterprise-value-to-its-Ebitda, or EV/Ebitda, to 15-times September 2025 EV/Ebitda.
However, the brokerage cut ACC's fiscal 2025, 2026, and 2027 Ebitda estimates by 22%, 4% and 2%, respectively, to incorporate lower realisation based on the recent trends.
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