The shares of India’s foremost manufacturer of cement gained up to 1.3 percent after ICICI Direct, a well-known brokerage recommended a ‘buy’ rating.
With a market capitalization of Rs 49,213.41 crore, the shares of ACC Ltd closed at Rs 2,620.70 per share, which fell around 0.47 percent as compared to the previous closing price of Rs 2633.20 apiece.
Looking into ACC’s performance, revenue increased by 8 percent from Rs 4,537 crore in Q3 FY23 to Rs 4,914 crore in Q3 FY24. During the same period, net profit increased by 376 percent, from Rs 113 crore to Rs 538 crore.
ICICI Direct, one of the well-known brokerages in India, gave a ‘Buy’ call on the cement stock with a target price of Rs 3,225 apiece, indicating a potential upside of 23 percent from Thursday’s closing price of Rs 2,620.70 per share.
Here is the rationale behind the bullish potential upside of 23%:
● The company has been consistently expanding its cement capacity, with recent expansions at Amethi and acquisitions such as Asian Concretes. Further expansions planned at Sindri and Salai Banwa are expected to increase capacity to 42.6 mtpa by FY26E, fostering healthy volume growth.
● As per the brokerage, the projected 10% CAGR in volumes over FY23-26E is attributed to the ramp-up of recent capacity additions, upcoming expansions, and a resurgence in demand. Additionally, synergy benefits from parent company units and the commencement of clinker production at Amethi are poised to drive cement production growth further.
● ACC is expected to witness significant margin expansion primarily due to operational efficiencies. These efficiencies include increasing the share of waste heat recovery power to 25% by FY25E, lower fuel prices, and positive operating leverage from healthy volume growth.
● Additionally, factors like increasing demand, industry consolidation, and a higher share of premium products are anticipated to lead to a rise in cement realization, further contributing to improved EBITDA per ton by FY26E.
The firm operates 16 cement production plants (10 integrated and 6 grinding) across India, as well as 85+ RMC units. The northern area accounts for 32% of total volumes, followed by the eastern (25%), western (20%), central (13%), and southern (10%) regions.
ACC Limited manufactures and markets cement and associated goods. It works in two segments: cement and ready-mix concrete. The company makes many types of cement, including ordinary Portland Cement (OPC), Portland Pozollana Cement (PPC), Portland Slag Cement (PSC), composite cement, and RMX.
Written by:- Abhishek Singh
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