The shares of India’s foremost manufacturer of cement gained up to 0.2 percent after a well-known brokerage recommended a ‘buy’ rating.
With a market capitalization of Rs 43,005.16 crore, the shares of ACC Ltd closed at Rs 2,290.10 per share, which fell around 1.36 percent as compared to the previous closing price of Rs 2,321.70 apiece.
Looking into ACC’s performance, revenue increased by 11 percent from Rs 3,987 crore in Q2 FY23 to Rs 4,435 crore in Q2 FY24. During the same period, net profit increased by 545 percent, from a loss of Rs 87 crore to a profit of Rs 388 crore.
HDFC Securities, one of the well-known brokerages in India, gave a ‘Buy’ call on the cement stock with a target price of Rs 2,770, indicating a potential upside of 20 percent from Tuesday’s closing price of Rs 2,297.40 per share.
Here’s the explanation for the probable upward target:
● Despite disappointing demand, cement prices showed resilience, recovering across most regions. Prices remained flat in the central region, rose in the north, and west, and increased significantly in the south, resulting in a pan-India average price recovery of 3% QoQ.
● The brokerage said, that in Q3, a substantial 2% QoQ increase in net sales realization (NSR) is expected, coupled with a 1% QoQ reduction in unit operating expenses, resulting in an estimated Rs 184/MT QoQ margin rise and the industry margin surpassing Rs 1000/MT after eight quarters.
● Aggregate revenue, EBITDA, and PAT for the coverage universe are estimated to grow by 9%, 49%, and 78% YoY, respectively. Over four years, the CAGR for aggregate revenue/EBITDA/APAT is expected to be 12%, 12%, and 16%, respectively.
● Industry volume is predicted to grow by 10% YoY in FY24. Input cost reduction is expected to bottom out in Q3FY24. The recovery in margins is anticipated to continue in FY25, with an estimated Rs 210 per MT YoY recovery in FY24/FY25.
● Reduction in diesel prices ahead of general elections could further reduce industry operating expenses by Rs 50/MT, positively impacting the industry’s profit outlook.
The company’s recent shareholding pattern, The Promoters of the Company own 56.69 percent while Retail shareholders own a 12.76 percent stake in the company and Foreign Institutional Investors own a 6.24 percent stake.
ACC Limited produces and sells cement and ready-mixed concrete. The firm has production facilities across India and mostly serves the local market.
Written by:- Abhishek Singh
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