The cement industry in India is a key sector, producing over 350 million tonnes annually. It ranks as the second-largest producer globally. Driven by infrastructure and housing demands, the industry comprises around 210 large cement plants and over 350 mini cement plants, contributing significantly to the economy.
With a market capitalization of Rs 48,734.55 crore, the shares of ACC Ltd were trading at Rs 2,597.00 apiece, increasing around 0.24 percent as compared to the previous closing price of Rs 2,590.90 per share.
the company has announced financial performance for Q1FY25, revenue plummeted by 1 percent from Rs 5,201 crore in Q4FY23 to Rs 5,155 crore in Q4FY24, and during the same time frame, net profit shrunk by 22 percent from Rs 466 crore and Rs 361 crore.
Motilal Oswal, one of the well-known brokerages in India, gave a ‘Buy’ call on the cement stock with a target price of Rs 3,300 apiece, indicating a potential upside of 27 percent from Wednesday’s price of Rs 2,597.00 per share.
Here is the rationale for such a bullish movement of 28%:-
● According to the brokerage, ACC’s 1QFY25 performance was below expectations, owing principally to lower-than-expected realization (2% lower). EBITDA at Rs 6.8 billion was 7% lower than expected, with EBITDA/t at Rs 664 vs an estimate of Rs 736. OPM fell 165 basis points year on year to around 13% (estimated at 14%). PAT was Rs 3.7 billion, compared to an estimated Rs 4.2 billion, due to poorer operating performance and other revenues.
● Management is optimistic about the industry’s demand outlook, expecting cement consumption to expand by 7-9% YoY in FY25, boosted by increased government investment in infrastructure projects such as road and highway building. In the first quarter, the firm recorded a 9% gain in volume, driven by an increase in premium items and improved efficiency.
● In the first quarter of FY25, revenue/EBITDA/adj. PAT was Rs 51.6 billion/Rs 6.8 billion/Rs 3.7 billion. Cement volume increased 9% year on year to 10.2mt (up 3% from expectation). RMC sales fell 9% YoY to Rs 3.3 billion (26% more than forecast). The RMC business recorded an EBIT margin of 7% in 1QFY25, compared to 1%/5% in 1Q/4QFY24.
● Brokerage also added that monsoons are expected to continue to put pressure on cement prices in the foreseeable future. Efforts to reduce costs have resulted in constant improvement in opex/t.
ACC Limited manufactures and markets cement and its associated goods. It works in two segments: cement and ready-mixed concrete (RMX). The company produces many types of cement, including OPC, PPC, PSC, composite cement, and RMX.
Written by:- Abhishek Singh
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
